Here is another point of view on the overall construction market provide by FMIa management consulting & investment banking company serving the engineering and construction industry.
“Even as Black Swan Events seem to be occurring everywhere around the globe, the NRCI continues its slow advance into growth territory for the nonresidential construction sector. In spite of adjustments made to accommodate the rising cost of materials, the NRCI moved up 1.4 points to 58.7 for the second quarter. That’s the fifth quarter in a row that the Index has remained at least slightly in positive territory. The slow, uneven recovery reflects the mixed signals from the national economy, where consumer spending begins to improve just as gas prices skyrocket, and automotive sales start to bounce back as an unparalleled disaster in Japan takes billions of dollars in parts and automotive manufacturing offline.”
NRCI Second Quarter 2011 Highlights
Overall Economy:The overall economy component of the NRCI continues to improve at a steady rate, as the component scored 74.7 again this quarter.
Overall Economy Where Panelists Do Business:With a component score of 72.9, panelists are beginning to see more economic improvement closer to their home markets.
Panelists’ Construction Business:The “trickle-down” effect is beginning to show up in panelists’ construction business, as they now see their own businesses beginning to improve even though slower than the overall economy. The index component is now 63.4 compared with 57.1 last quarter. While backlogs are up to a median of nine months from eight months for the previous two quarters, panelists’ expectations of backlogs in the next quarter are down slightly to a component score of 58.2.
Nonresidential Building Construction Market Where Panelists Do Business:At 60.6, for the second quarter in a row, panelists think the business in their markets in general is in growth mode. Nonetheless, this component is not yet in bullish territory, so we can expect competition for available work is still fierce.
Cost of Materials:If there is one thing almost all panelists agree on, it is that the costs of materials continue to rise as the component index is now 6.6. This component works against the overall NRCI score, and there is no sign this number will improve anytime soon. (Note: Rising costs of labor and materials are a drag on total NRCI score.)