Construction Industry on Rebound?
By Matthew J. DeVries and William Geisen
Design Cost Data™ is a leading industry resource for preliminary cost
estimating. Whether you are a developer, architect, general contractor,
specialty subcontractor, appraiser or other estimator in construction, you
undoubtedly have been following the financial trends in our industry. Several
recent economic reports indicate that the construction industry finally might be
on the rebound. Such news has to be music to the ears of many construction
professionals who have been suffering from the economic downturn since early
2008. Recently published data suggests that the worst is over and that the
construction market is gradually recovering.
On March 25, 2013, Engineering News Record published the first quarter results
for its Construction Industry Confidence Index (“CICI”) survey, which reflected
that the CICI surged to 64 points on a scale of 100, representing a growing
market. A CICI of 50 demonstrates a stable market. The CICI measures sentiments
of construction executives from large construction and design firms around the
country, and the survey results reflect the executives’ views on where the
market will be in the next 3-6 months and over a 12-18 month period. In 2011,
the average CICI was 44; and in 2012, the average CICI was 53.5. The highest
rated sectors in ENR’s recent survey results were petroleum, multi-unit
residential, power, health care and industrial process-manufacturing. Hopefully,
the CICI first quarter results are the start of a growing trend.
The CICI first quarter results are similar to the soon-to-be-published results
of the latest Confidex survey from the Construction Financial Management
Association. Under CFMA’s system, a Confidex rating of 100 indicates a stable
market. For the first quarter of 2013, CFMA’s Confidex rose from 114 to 129 (on
a scale of 200). CFMA’s Confidex also shows an upward trend for the overall
outlook for 2013.
On March 29, 2013, The Associated General Contractors of America released data
which reflects that construction employment expanded in 35 states in February as
the construction industry added 48,000 jobs nationally, the largest one-month
gain in nearly six years. According to the AGC’s chief economist, expansion will
continue for residential and private non-residential construction in 2013.
According to the AGC data, Alaska, Hawaii and Texas showed the largest
construction employment gains over the past 12 months; while Montana, Arkansas
and Rhode Island showed the largest declines.
Construction spending also rebounded in February, according to data released by
the AGC on April 1, 2013. The recently released data reflects that construction
spending increased by 1.2% in February, 2013 and increased by 7.9% from
February, 2012 to February, 2013. The monthly and year-over-year gains were
primarily seen in the private residential and non-residential construction
sectors. The largest private non-residential categories were power construction
and manufacturing construction.
This recent economic data indicates that the worst times for the construction
industry might be in the rearview mirror and that construction is finally
starting to rebound. We have not polled our construction clients, but,
empirically, we get the sense that most of them share in these optimistic
reports. Recall that President Kennedy said, “The American, by nature, is
optimistic. He is experimental, an inventor and a builder who builds best when
called upon to build greatly.” We hope that 2013 is building up to be a great
year for you.
the Authors: Matt and Bill are members of the Construction Service Group of
Stites & Harbison, PLLC. Matt lives in Nashville and is the founder of
Bill practices nationwide, but has offices in Lexington and Covington, KY. You
can reach the authors at
email@example.com or Bill at
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