Despite a slow start to 2015 for the construction industry, great things are on the horizon according to the results of our 1st Quarter 2015 Construction Data Index (CDI). Future outlook for the commercial construction industry reached an all-time high, with 74 percent of construction professionals surveyed indicating business will be doing better six months from now. Based on this, we should see a positive turnaround over the next couple of months after seeing the rate of construction spending drop for two consecutive months along with the industry shedding jobs in March. (The last time the construction industry lost jobs was back in December 2013.)
According to the Bureau of Labor Statistics, the construction industry added 69,000 jobs in the 1st Quarter of 2015. There were 41,000 jobs added in January and 29,000 jobs added in February. In March, the construction industry actually lost 1,000 jobs, which ended 14 consecutive months of job growth. Total construction employment currently stands at 6,344,000 jobs, an increase of 282,000 jobs since March 2014.
The seasonally adjusted rate of construction spending fell from $984.5 billion in December 2014 to $967.9 billion in January 2015. It dropped again to $967.2 in February, according to the U.S. Census Bureau. On a positive note, total construction spending for January and February 2015 was $132.9 billion, 1.5 percent higher than the $130.3 billion spent during the first two months of 2014.
Judging by the responses to our 1st Quarter CDI survey, the winter weather we experienced had a serious impact on the construction industry. Only 49 percent of respondents indicated that their business was doing better now than it was six months ago. Thirty-six percent of respondents indicated that business was about the same over the past six months and 15 percent stated business was doing worse.
When asked how they feel their business will be doing six months from now, 74 percent of respondents, a record high for the CDI, indicated their business would be doing better. Only 6 percent of respondents felt their business would be doing worse six months from now, and 20 percent stated that business would be about the same in six months’ time.
Looking at some of the other leading commercial construction industry indicators, 2015 is expected to shake off the sluggish start and continue the improvement we saw last year.
FMI’s Nonresidential Construction Index Report for 1st Quarter 2015 was at 64.8, up from the 62.8 points for 4th Quarter 2014 and right around the same number (64.9) we saw for 1st Quarter 2014. Any score above 50 indicates expansion, while any score below 50 indicates contraction.
FMI’s 1st Quarter 2015 Construction Outlook is predicting continued growth for the year with construction put-in-place increasing by 8 percent for the year, slightly faster than what we saw last year.
The American Institute of Architects’ (AIA) Architecture Billings Index (ABI) score for January was down to 49.9 in January, but recovered in February with a score of 50.4 showing an increase in design activity. The ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending and any score above 50 indicates an increase in billings and any score below 50 indicates a decrease in billings.
The Turner Building Cost Index, which measures nonresidential building costs, was at 927 for 1st Quarter 2015. This is 1.09 percent higher than the 917 recorded during 4th Quarter 2014 and 4.75 percent higher than the 1st Quarter 2014 score of 885.
The commercial construction industry didn’t get off to the start that most people were hoping for during the first quarter of the year, but it’s not how you start, but how you finish that counts. There’s still plenty of time left in 2015 to outpace last year and see growth in both jobs added and construction put-in-place over the next three quarters of the year.
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, Construction Data surveys professionals working in the commercial construction industry 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.
If you would like to participate in future CDI surveys, please email us firstname.lastname@example.org.