Identification of Price Leading Indicators for Construction Resources

Abstract

Resources prices fluctuation in many countries is an influential factor in construction projects’ characterization of schedule slippages and cost overrun. Each country’s market may be defined by its influential materials. In Egypt, Cement, and steel bars have major contribution to most of the construction activities. Changes in the material prices, especially drastic ones, are major threats to any contractor’s plans as well as owners’ budgets. Hence, timely forecasting of these changes can be a major advantage to contractors or owners. Prior to forecasting the fluctuations, identification of the leading indicators and investigation of the best time lag between these indicators and the predicted prices shall be conducted. Many researchers utilized statistical tests to identify leading indicators of cost indices, however, each resource might have its own leading indicator and unique lag time. This research aims at identifying the leading indicators of Egypt’s main material prices through utilizing statistical tests such as Granger causality test. Egypt’s macroeconomic indicators GDP, money supply, external debt, lending rate, stock market index, and U.S. dollar to Egyptian pound exchange rate were found to be the leading indicators of steel price. Lending rate, unemployment rate, and foreign reserves were found to be cement prices leading indicators.