Critical Role of Macroeconomic Indicators in Steering Material Prices in Construction Industry: Case of Pakistan

Abstract

Construction industry is extremely volatile when it comes to material prices and this is attributed to various contributing factors such as economic and environmental factors. An assessment of such factors that can have a direct influence on material prices can help project managers and owners/investors to have an efficient and viable project planning which subsequently leads to project success. The core objective of this research is to assess the impact of macroeconomic factors on material prices in construction industry of Pakistan. For this purpose, the present study examines the relationship of macroeconomic factors such as Interest rate, GDP growth, money supply and exchange rate with the construction material prices. The estimates indicate that all of the macroeconomic variables used in the study significantly effects the construction material prices. The results exhibits that GDP growth, money supply and exchange rate have positive and statistically significant impact on construction prices in Pakistan. However, the impact of interest rate has been observed negative on construction material prices. These results can be used by the governments and policy makers as well as construction managers and owners in budget and time estimations.