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Rising Construction Material Prices in Nicaragua: A Continuing Upward Trend

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Rising Construction Material Prices in Nicaragua: A Continuing Upward Trend

Construction materials prices continue to rise in Nicaragua, signaling an ongoing upward trend that began in June 2021. The latest data released by the government reveals that materials saw a 0.8% increase in July, resulting in a cumulative 6.1% increase over the past seven months.

While the rate of price increases has eased since last year, the current levels are still higher compared to two years ago. In 2021, construction materials experienced a cumulative increase of 0.7%, whereas the current variation exceeds 6%.

Between January and July 2022, the inflation index for construction materials stood at 12.3%, twice the current rate, suggesting a slowdown in price increases, but still significant.

Over the past year, construction materials have seen an 11.5% price increase, slightly lower than the 15.8% increase in the previous year but significantly higher than the 0.2% observed in 2021.

Since June 2021, construction materials in Nicaragua have consistently become more expensive, reflecting a global trend of supply chain disruptions caused by the pandemic. The halt in global economic activity during the health crisis caused production delays, leading to a demand-supply imbalance when economies reopened in 2021.

The start of the Russian war in Ukraine in 2022 further worsened the situation, triggering price increases not only for construction materials but also for crude oil.

Towards the end of last year, global prices showed signs of stabilization, which has continued into this year. This could partly explain the slowdown in price increases for construction materials in Nicaragua.

However, the respite does not mean a halt in price increases. July 2022 alone saw a 0.7% rise in construction material prices, slightly lower than June’s increase but still higher than the lowest monthly increase of 0.5% observed in January.

Among the chapters comprising the price index, only products grouped under toilets and floors reported a decrease in prices. Metals and derivatives, cement and derivatives, electricity and lighting, wood and ceilings all saw increases in prices.

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In metals and derivatives, there was a 1.1% increase in July, pushing the year-to-date increase to 14.1%. Cement and derivatives saw a monthly increase of 0.9%, with cement and bolón stone contributing to the rise. Electricity and lighting saw a 1% increase, attributed to higher costs for electrical outlets, electric wire, and switches. Wood and roof materials experienced a 0.2% increase, while toilets and floors saw a negligible decrease of 0.1%.

The World Bank predicts a decline in metal prices in 2023, mainly due to slower global growth and concerns over a slowdown in the Chinese economy. However, iron ore prices remain stable due to strong demand from the Chinese steel sector. Copper prices are expected to fall by 4% in 2023, while nickel prices are projected to decrease by around 15%.

In Nicaragua, the increase in construction material prices coincides with a sluggish construction sector. In the first quarter of this year, the country’s construction Gross Domestic Product (GDP) decreased by 1.2%, reflecting a negative annual average of 12.1%. Private construction saw declines, especially in residential, services, and industrial buildings, while public construction witnessed growth in non-residential buildings and civil engineering projects.

The rising cost of construction materials, influenced by global inflation, tends to impact the final prices of buildings, potentially deterring demand from prospective buyers.

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