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Opinion
What concrete costs tell us about construction inflation
Pablo Cristi Worm Turner & Townsend
Concrete costs are an early indicator of inflation in construction (Image: Dreamstime.com)
Tracking concrete prices can provide the industry with valuable insights to inform decision-making, writes Pablo Cristi Worm.
The price of ready-mixed concrete serves as an early indicator of inflation within construction. Its fluctuations offer early signals of wider inflationary trends in the industry. Its pricing is influenced by energy costs, supply chain dynamics and demand levels.
Periods of heightened demand or supply-side disruptions typically lead to increased concrete prices, creating ripple effects throughout the construction project inflation.
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Ready-mixed concrete also serves as an interesting indicator of local construction inflation. While its price is affected by global commodity markets and energy costs, it cannot be transported over long distances due to its short shelf life. This necessitates domestic production, making the price of ready-mixed concrete sensitive to local factors such as the cost of raw materials, labour expenses and regional supply and demand dynamics.
The top graph below shows a scatterplot demonstrating the strong positive relationship between the price of ready-mixed concrete on the horizontal axis and construction output prices for all new work – a measure of construction inflation published by the Office for National Statistics – on the vertical axis.
Each dot represents an intersection between the price of ready-mixed concrete and the construction output price for all new work in a given time. The high correlation coefficient (R-squared = 0.91) shows that when the price of ready-mixed concrete increases, so does the construction output price index, underscoring the material’s predictive power.
Housing output
While ready-mixed concrete is a good early indicator of inflation in new work, the delivery of concrete blocks serves as an early indicator of construction output in the housing sector.
Although traditional metrics like housing starts and construction output provide valuable insights, they tend to lag behind actual construction progress. The delivery of concrete blocks serves as a timely early indicator of new housing activity, with demand often preceding substantial onsite activity. By analysing trends in supply and delivery, stakeholders can gain early insights into the trajectory of the construction sector.
A strong correlation exists between the volume of concrete block deliveries and new housing construction output. Historical data reveals that a surge in deliveries typically precedes a rise in construction activity by three to six months, reflecting the procurement process and early-stage construction needs.
Source: ONS (top), Department for Business and Trade, ONS (above)
The bottom graph illustrates the trend in monthly deliveries of concrete blocks and construction output for total new housing. An upward trend in the delivery of concrete blocks suggests increasing construction activity, while a downward trend signals a potential slowdown. The slope of the line provides further insights into the pace of construction.
Recent data on concrete block deliveries indicates a recovery in housebuilding activity. Deliveries began trending upwards in the second half of 2024, recovering some of the ground lost earlier.
Concrete block deliveries increased by 5.2% in the year to October 2024, while new housing activity is expected to increase over the next months. Despite this recovery, delivery levels remain 24.9% below pre-pandemic levels of February 2020.
Leveraging insights
Tracking the volume and frequency of material deliveries and price trends offers valuable insights into construction activity before they appear in lagging indicators.
Construction firms can use this type of data to optimise procurement and workforce planning. Policymakers can treat delivery trends as early warning signs of changes in construction activity, aiding macroeconomic forecasting. Similarly, suppliers can align production schedules with anticipated demand, reducing the risk of supply chain disruptions.
By leveraging insights like these, stakeholders can enhance their strategic decision-making, ensuring a more agile, resilient and responsive construction sector, staying well prepared for future demands.
The November/December 2025 issue of Construction Management magazine is now available to read in digital format.
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