CDCNews’ 1st Quarter 2013 Construction Data Index (CDI) is out and overall industry professionals feel their business is doing better now than they were six months ago and optimism about how their business will be doing six months from now is the highest we have seen in quite some time. The CDI results, along with other industry indicators, reaffirm a statement recently made by CDCNews President Bill Black based on recent conversations with our customers, “The Great Recession is over!”
Based on responses we received, 49 percent of companies surveyed stated that their businesses are doing better now than they were six months ago. Even more impressive is the 61 percent of respondents who feel their business will be doing better than it currently is six months from now.
Companies that stated their businesses are doing the same or better today than they were six months ago was at 88 percent for the first quarter of 2013. This is a significant increase compared to the responses received last quarter when only 80 percent of companies surveyed stated their businesses were doing the same or better relative to the previous six months. Only 12 percent of companies responded that their business was worse off than it was six months ago. In 4th Quarter 2012 companies that stated they were doing worse compared to six months ago was at 20 percent.
If we take a look at how companies feel their businesses will be doing six months from now we see a big jump in optimism relative to previous quarter responses. Respondents who felt their businesses would be doing better rose 14 percent from 47 percent in 4th Quarter 2012 to 61 percent in 1st Quarter 2013. The percentage of respondents who felt their business would be about the same in six months dropped to 34 percent for the first quarter from 41 percent for 4th Quarter 2012. The most impressive figure is that only 5 percent of companies surveyed feel their businesses will be doing worse six months from now. This means that 95 percent of those surveyed feel that six months from now their businesses will be doing the same or better than they are today.
Now let’s take a look at some of the other industry-leading indicators to get a better feel for what 2013 has in store for commercial construction.
FMI’s Nonresidential Construction Index Report for 1st Quarter 2013 continues to show growth coming in at 58.1. This matches the number it was for 1st Quarter 2012 is the highest it’s been since 2nd Quarter 2012 when it reached 59.8. Remember, any score above 50 indicates expansion, while any score below 50 indicates contraction.
The U.S. Labor Department employment report for March 2013 shows that the construction industry gained 18,000 jobs during the month. This marks the tenth straight month of job growth for the industry. The total number of jobs gained in 1st Quarter 2013 in the construction industy was at 94,000 with 48,000 being added in February and 28,000 added in January. There have been 169,000 construction industry jobs gained since September 2012.
In January, the Portland Cement Association updated their predictions for concrete consumption for 2013. They are now forecasting an 8.1 percent growth in consumption for 2013. Before the end of 4th Quarter 2012 they were only predicting a 6 percent increase in consumption and that was only if Congress managed to reach a fiscal cliff deal, which it did.
For the seventh straight month the American Institute of Architectects’ Architecture Billings Index showed growth. For February, the ABI was at 54.9 which was the strongest billings growth since early 2008. For the AIA’s index, a score of 50 indicates no change from the previous survey period. All sectors of the industry showed growth with Commercial/Industrial at 53.3, Institutional at 50.7 and Residential at 60.9. The Northeast region led the way at 56.7 followed by the Midwest and West region both at 54.7 and the South region clocking in at 52.7. That makes five straight months with all regions having a score above 50.
The Turner Building Cost Index, for the tenth quarter in a row, reported a gradual increase in costs. For 1st Quarter 2013 it rose to 849 which is up 1.19 percent from the previous quarter.
1st Quarter 2012 821
2nd Quarter 2012 826
3rd Quarter 2012 832
4th Quarter 2012 839
1st Quarter 2013 849
The Turner BCI measures costs in the non-residential building construction market in the United States.
For February 2013, the nation’s nonresidential construction spending was up 0.7 percent from January according to the U.S. Commerce Department. This was up 2.6 percent from a year ago. Breaking it down further, private sector nonresidential construction spending was up 0.4 percent in February over January and up 6.1 percent from February 2012 numbers. On the public side construction spending was up 1.1 percent for the month but fell 1.2 percent from last year.
With 61 percent of respondents feeling that their businesses will be doing better in six months and industry forecasts predicting continued growth, 2013 should be a good year for the construction industry. The one dark spot on the horizon is the affect the sequestration will ultimately have on the industry. Some early predictions are that it could result in nearly $4 billion in construction spending cuts and put nearly 100,000 construction jobs at risk. The main impact will be fewer solicitations for federal construction projects which could also trickle down to the state and local levels for those agencies that receive federal funding. It’s still too early to tell what the total impact will be, firms that primarily do construction work for the federal government will be the hardest hit. Some of this could be mitigated depending on what comes about for the president’s plan to fix the nation’s infrastructure which includes investing billions to repair roads and bridges as well as attracting private investors to help fund construction projects.
About the CDI
The Construction Data Index (CDI) is a user-based forward-looking survey of the commercial construction industry. The index is a forecast tool that predicts future outlook for general contractors, subcontractors, and building material suppliers.
The CDI is designed to help firms answer one simple question: According to industry professionals like myself, are things getting better or worse? In order to obtain the data for this index, CDCNews surveys subscribers on a monthly basis. The survey asks two questions:
- How is your business doing, relative to six months ago?
- How do you see your business doing six months from now?
Results are measured on a five point Likert scale: with 5 – much better, 4 – a little better, 3 – the same, 2 – a little worse and 1 – worse.
The CDI’s concept is similar to the AIA’s Architectural Billings Index, the ABC’s Backlog Indicator, and NAIOP’s Industrial Space Demand Forecast. The CDI is forward looking and an indicator of how commercial construction companies view their industry’s future. The CDI provides a view of how contractors view their own industry now and what they see as their prospects for the future.