Construction Outlook Sets Record
U.S. commercial and industrial builders woke up on the right side of the economy this year, bullish on their productivity, their prospects, and their growth in the year ahead.
That's the view of the new 2014 First-Quarter Non-Residential Construction Index, compiled by global engineering and construction consultancy FMI, based in Raleigh, NC.
The index, now in its fifth year, is a measure of a variety of economic indicators from construction employers. The first quarter of 2014 showed a 7.5-point increase over the fourth quarter of 2013, and a 6.8-point increase over the first quarter of 2013.
The current overall index score, 64.9, is the highest to date, reflecting an optimistic view of a rising economy, FMI reports. Scores higher than 50 indicate expansion.
Regarding the overall economy, the index rebounded by 19.1 points from the fourth quarter, notching a 79.8. Employers' views of their local economies climbed by 15.4 points over the last quarter, to a rating of 77.0. Overall, employers' view of their own business is steadier than the swings in the market, gaining 5.1 points to reach 75.4.
Nonresidential construction markets where the FMI panelists do business is struggling, but gaining, FMI said.
Projects are improving steadily, FMI says. Nearly half of participants expect construction to grow up to 5 percent this year.
"It takes some time for the optimism in the overall economy to turn to projects sold and steel going up," FMI reported. "Nonetheless, projects are steadily improving as the index bounced back 8.5 points in the first quarter, but only 1.0 point higher than the third quarter of 2013."
Nearly half of participants (49 percent) say they expect construction to grow up to 5 percent in 2014. That figure is up from just 18 percent a year ago.
The median backlog remains at about nine months, "suggesting a continuing competitive market for construction," FMI said.
With growth comes challenges, the employers concede. "Hiring talented people" tops the list of employer concerns for 2014, followed closely by "finding profitable work."
Employers also report "uncertainty in the direction of the government, especially regarding decisions directly affecting the economy." And the rising cost of labor and materials is a concern.
FMI's Non-Residential Construction Index reached its highest score since it began in 2009.
More than half of employers plan a 0-5 percent increase in staff, while 18 percent expect to add 5-10 percent to their full-time payroll.
Still, stung by the downsizing of 2009 and 2010, 35 percent of contractors say they will not make new hires until their current staff is "consistently over full work capacity." On the other hand, 28 percent say there "is always room for exceptional individuals."
Contractors "are increasingly aware that they need to keep the talent pipeline full to succeed retiring talent, particularly at top positions as more boomers in the boardroom look to retire," according to FMI.
FMI says that last year's results proved its employers to be slightly conservative in their estimates, and so sees room for optimism this year.
However, the company also notes that this is a post-recession election year, which is likely to influence promises made, policies developed and funds spent.