Uncovering Causal Relationships Between Construction Material Prices in Egypt: A Time-Series Analysis

The construction sector operates within a highly dynamic environment influenced by numerous elements, including macroeconomic variables such as inflation, interest rates, and national economic performance. For stakeholders within this industry, the ability to forecast construction costs accurately is crucial for ensuring financial health and devising effective pricing strategies. In recent years, global economic instability has left a profound impact on national economies, this turbulence is especially critical considering the sector’s notable contribution to the country’s GDP, which stands at approximately 14%. Ongoing inflationary pressures and significant currency depreciation have led to escalating costs in land acquisition, building materials, and labor. This study focuses on construction materials, a main cost component contributing to 74% of projects budgets. Different construction stakeholders ranging from project owners to contractors and cost consultants—face increasing difficulty in anticipating overall project expenses. Even with signs of economic improvement, new cost-related challenges continue to emerge, often resulting in budget overruns and project delays, as early optimism is frequently tempered by financial and scheduling constraints. While previous studies have attempted to link economic indicators with construction cost forecasting, limited attention has been given to understanding how inflation in material prices spreads across different materials in unstable economies. This research employs a robust methodology to fill that gap by examining how inflationary effects is transmitted between construction materials. Key findings of this research include identifying key inflation transmitters with Cement emerging as the single highest transmitter, with a weighted out-degree of rank 1, aligning with the results interpreted from the BGCM, highly susceptible materials identified included sand as a basic earth material, its price responds acutely to shocks in transported aggregates and energy costs.