International Journal of Multidisciplinary Research and Publications

ISSN (Online): 2581-6187

An Assessment of the Impact of Inflation on the

Abstract— The construction industry is considered as one of the predictive mathematical relationship between inflation rates in
pillars of countries’ economy and responsible for the physical Sudan and the trend in construction materials prices increase.
development of their built environment. The growth in the industry’s
activities is always coupled with higher demand for capital, labor, II. LITERATURE REVIEW
materials and technology. The results of an analytical study onto the
effect of inflation on prices of selected construction materials in The construction industry is generally responsible for the
Sudan are presented in this paper. Inflationary increase in the prices physical development or the transformation of the
of these materials was studied over the period 2012 to 2018. environment which makes the built environment very vital to
Inflation rates data was collected from the Central Bank of Sudan the social economic development of any nation [1].
(CBOS) formal statistics and the building materials prices were Accordingly, nations strive to keep steady economies and
obtained from the local market. The results confirmed that inflation consequently maintaining stable price levels for goods and
rates in Sudan have been far from stable, and have affected materials commodities [2][3][4].
prices considerably. Regression analysis was performed on the data A plethora of authors who brought to attention the problem
and the results yielded a third order polynomial equation relating the
of construction materials prices fluctuation highlighted some
cumulative inflation rate and construction material prices. Based on
the results; a significant level of correlation was reached, indicating of the contributing factors including supply and demand,
the appropriateness of using the cumulative inflation rate in increased transport charges, high-energy costs, exchange rates
predicting the affected prices of building materials. The study called and charges for exported raw materials, goods and products
for the use of the calculated construction material inflation rate index [5][6][7][8]. A major problem for contractors of civil
(CMIR) as a suitable computation method for fluctuation in material engineering works is inflation, “…the general upward trend of
prices and consequently, more realistic estimating and cost planning. prices of goods and services within an economy, [that] is
essentially a measure of how the prices of goods and services
Keywords— Construction materials prices, Inflation impact, Sudan. increase over time” [9]. As [3] noted, fluctuations in the rate
I. INTRODUCTION of inflation can cause serious problems in the economic
processes in the construction industry due to the nature of the
Several options for building materials normally exist for the process and the rate of return for work undertaken on
construction of any facility. Natural and/or synthetic building construction projects. Inflation will affect not only the cash
materials are produced and used in variable quantities flows of a project but also on the rate at which the cash flows
depending on the material behavior, required specifications, need to be discounted. Sudan, as a developing country, has
availability and cost. Yet, among the different aspects to lately experienced many developments in the building industry
consider, cost effectiveness is a major issue of concern and an witnessed through the increase in the level of construction
important criterion to depend on when choosing among the works and the wide range of materials used especially in urban
options. World widely, the prices of construction materials centers. However, the availability of the local building
exhibit regular rises for many reasons such as tariff increases, materials form a major obstacle in the development process in
economic instability, rising fuel prices for transportation or the country because it lacks the capacity to produce sufficient
scarcity of resources or raw materials. This in turn slims the amounts of building materials in order to satisfy their local
profitability margin thus new directions have emerged to adapt demand[10]. Suppliers of building materials depend on the
and control cost increase. Smart technologies, alternative international market as a source of building materials while
materials and increased efficiency in managing materials simple building materials such as cement, ssand and gravel are
handling and usage are some. A study conducted in Sudan brought from the local market. The instability that
considered inflation as a harmful economic phenomenon that characterizes the performance of the economy poses some
adversely affect the construction industry in general and the implications on the building materials industry in Sudan.
construction materials in particular. This paper portrays an With a sharp inflationary rise, the construction sector
analysis of the inflation trend in Sudan and its effect on the struggled and many projects were concluded. [11] asserted
construction industry for the last few years. Initially, a market the fact that “exessive cost inflation in the construction sector,
survey was conducted to determine the pattern of prices which it describes as a “key risk” for 2019”.
increase over the selected period to allow gauging the
inflationary effect. Eventually, it was required to derive a III. METHODOLOGY
An analytical study was conducted where the procedure

41

Elkhider B. E. Mohamed and Salma Y.M. Mahmoud, “An assessment of the impact of inflation on the prices of selected construction
materials in Sudan”, International Journal of Multidisciplinary Research and Publications (IJMRAP), Volume 2, Issue 12, pp. 41-44, 2020.
 International Journal of Multidisciplinary Research and Publications
ISSN (Online): 2581-6187

followed the steps depicted by Fig. 1. The hypothesis being tested was whether a significant
relationship exists between inflation rate and the trend price
Literature review movement of building materials. To test the hypothesis which
will also promote the achievement of the purpose of the study,
simple regression statistical analysis was applied to the data
Formally published Market survey for obtained on prices of the construction materials under study.
Inflation rate (CBOS) materials pries Based on the inferential of the quantitative data and regression
analysis, some mathematical relationships were development
as shown in Fig 2 through Fig. 6.
Inflationary Materials
Relationship
trends Prices increase TABLE III. Meaning of correlation for positive and negative correlation
pattern Pearson correlation Meaning
+1 Fully correlated
Cumulative Construction 0.7 – 0.99 Strong bonding
Inflation rate materials 0.5 – 0.69 Medium bonding
Inflation rate 0.49 – 0.01 Weak bonding
0 No correlated
Regression

Mathematical relationships

Fig. 1: The flowchart of the research steps

IV. RESULTS
Inflation rate, cumulative inflation rates and construction
materials average prices are collated as presented in tables 1
and 2.
TABLE I. Inflation rate and Cumulative Inflation Rate in Sudan from 2008 –
May 2018 Fig. 2: Reinforcing steel
Year Periods Inflation Cumulative Inflation
S1 (1 Jan – 31 May) 34.570 34.570
2012
S2 (1 Jun – 31 Dec) 35.550 70.120
S1 (1 Jan – 31 May) 38.440 108.56
2013
S2 (1 Jun – 31 Dec) 36.522 145.082
S1 (1 Jan – 31 May) 37.400 182.482
2014
S2 (1 Jun – 31 Dec) 37.560 220.042
S1 (1 Jan – 31 May) 16.830 236.872
2015
S2 (1 Jun – 31 Dec) 16.970 253.842 Fig. 3: Cement
S1 (1 Jan – 31 May) 17.540 271.382
2016
S2 (1 Jun – 31 Dec) 17.580 288.962
S1 (1 Jan – 31 May) 32.560 321.522
2017
S2 (1 Jun – 31 Dec) 32.600 354.122
May 2018 S1 (1 Jan – 31 May) 56.170 410.292
Fig. 3 Cement
TABLE II. Construction materials average prices in Sudan from 2012- May
2018 (all prices are in local currency SDG)
Reinforcing Cement Sharp
Bricks Aggregates
Years steel Pack Sand
(103) (m3)
(Ton) (50Kg) (m3)
4.700 30 35 180 40
2012
4.800 30 38 180 42
5.200 32 48 280 50
2013
5.200 35 48 300 53
7.000 40 56 340 60
2014
7.000 40 56 340 60
7.200 42 75 400 100
2015
7.250 45 75 400 100
10.000 65 100 500 123
2016
10.000 70 100 540 125
16.000 135 132 800 147
2017 Fig. 4: Sharp Sand
16.000 140 135 800 150
May
35.000 235 275 1000 300 The results depicted by Fig. 3 for cement show goodness
2018
of fit and high degree of explanation of the price variability by

42

Elkhider B. E. Mohamed and Salma Y.M. Mahmoud, “An assessment of the impact of inflation on the prices of selected construction
materials in Sudan”, International Journal of Multidisciplinary Research and Publications (IJMRAP), Volume 2, Issue 12, pp. 41-44, 2020.
 International Journal of Multidisciplinary Research and Publications
ISSN (Online): 2581-6187

the cumulative inflation rate of 97.5%. The degree of duties and crude oil prices also contribute to these increases
correlation being a high positive value of 0.98767 indicating a and have an effect on the trend in price movement.
strong relationship between the cumulative inflation rate and It was confirmed that most of the rise in prices was
construction materials prices. witnessed during the period after 2016 while a steady and
minimal rise occurred during the period between 2012-2016.
The results conveyed a strong relationship between the
cumulative inflation rate and construction materials’ prices.
In the light of the results of the study, it is recommended to
have a systematic reduction of the experienced in the use of
local building materials as substitutes for some imported
material in the construction industry. This may be done taking
into account the conditions of design buildings and approval
of the local building materials to be imported for this purpose.
So that building materials imported from other countries to
Sudan, so there is a rise in prices of building materials even if
there is stability in prices at the level of the economy. Despite
Fig. 5: Brick the fact that the Sudanese economy does notice stability in this
period of time, which is turn has a clear effect on the rise in
prices of building materials even when there is a relative
stability in the level of prices in economy.
It is necessary to benefit from the rate of inflation of
construction materials (CMIR) by working on developing it
and creating a data base for the construction sector in Sudan,
which will help in estimating the future costs of projects and
planning the target costs by owners and projects managers,
which in turn will help to reduce conflicts caused by sudden
change in prices or abandoned some owners for many projects
as a results of these projects exceeded the cost allocated to
Fig. 6: aggregates them as a results of the impact of construction materials for
inflation and exceeded the target cost. .
It was also observed that the results for reinforcing steel in The CMIR in Sudan will be a better basis for the
Fig. 2 and sharp sand in Fig. 4 showing goodness of fit and a calculation of fluctuation in prices of construction materials.
high degree of correlation between the price variability and the Professionals with policy-making expertise should be involved
cumulative inflation rate (97.176 % and 97.18%) respectively. in order to avoid policy government policies can that could
Their degrees of correlation being high positive values and affect the price of construction materials.
strong relationship between cumulative inflation rate and
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Elkhider B. E. Mohamed and Salma Y.M. Mahmoud, “An assessment of the impact of inflation on the prices of selected construction
materials in Sudan”, International Journal of Multidisciplinary Research and Publications (IJMRAP), Volume 2, Issue 12, pp. 41-44, 2020.
 International Journal of Multidisciplinary Research and Publications
ISSN (Online): 2581-6187

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44

Elkhider B. E. Mohamed and Salma Y.M. Mahmoud, “An assessment of the impact of inflation on the prices of selected construction
materials in Sudan”, International Journal of Multidisciplinary Research and Publications (IJMRAP), Volume 2, Issue 12, pp. 41-44, 2020.