The responses for Construction Data’s 3rd Quarter 2014 Construction Data Index have been compiled and a majority of respondents feel their business is doing better today than it was at the beginning of the year. Future optimism is also high with 63 percent of respondents indicating that their business will be doing better as we head into 2015.
The construction industry added 30,000 jobs in July, 16,000 jobs in August and 16,000 jobs in September according to the Bureau of Labor Statistics. As of September, construction employment has risen by 230,000 jobs over the past year. The 62,000 jobs added in the 3rd Quarter is an improvement over the 53,000 jobs construction industry jobs added during the 2nd Quarter. It is more than three times the 20,000 construction industry jobs added during 3rd Quarter 2013. The unemployment rate for the construction industry is at 7 percent, the lowest it’s been in over six years.
Construction spending was at a seasonally adjusted rate of $961 billion through August 2014, according to the U.S. Census Bureau. This is 0.8 percent lower than the revised July 2014 number of $968.8 billion, but is 5.0 percent higher than the August 2013 amount of $915.3 billion. July 2014 construction spending was revised to $968.8 billion which was 6.9 percent higher than the $906.6 billion for July 2013. The total value of construction for the first eight months of the year was $623.1 billion which was 6.8 percent higher than the first eight months of 2013 which was $583.2 billion.
When asked how your business is doing today relative to six months ago, 57 percent of respondents indicated that their business was doing better. Only 30 percent of respondents felt their business was doing about the same as it was six months ago and 13 percent felt that business was worse than it was six months ago. This is an improvement over the first two quarters this month were the number of respondents who felt their business was doing better hovered right around 50 percent.
When asked how they feel their business will be doing six months from now, 63 percent of respondents indicated their business would be doing better. Respondents who felt business would be about the same six months from now was at 29 percent and 8 percent of respondents stated that they felt their business would be doing worse than it currently is.
These responses were very similar to 3rd Quarter 2013 with the percentage of respondents that felt business would be better in the future was at 64 percent. Respondents who felt their business would be about the same six months from now was at 26 percent with 10 percent indicating they felt business would be worse in six months. Based on some of the comments provided by respondents, part of this is due to seasonal slowdown typically experienced during the winter months.
Now we’ll take a look at some of the other leading industry indicators as we head into the final quarter of 2014. After record scores for two consecutive quarters, FMI’s Nonresidential Construction Index Report for 3rd Quarter 2014 dropped 3.3 points to 62.5 from the 2nd Quarter’s score of 65.8 points. Despite dropping from the previous quarter, the score of 62.5 is still in the growth range as any score above 50 indicates expansion, while any score below 50 indicates contraction. This is also 2.2 points higher than the 3rd Quarter 2013 score of 60.3.
FMI’s Construction Outlook 3rd Quarter 2014 construction forecast remains in the “cautiously optimistic zone” as it has all year long with total construction-put-in-place expected to grow at a rate of 7 percent in 2014. This 7 percent forecast growth is expected to continue for the next couple of year indicating slow but steady growth.
The American Institute of Architects (AIA) reported August’s Architecture Billings Index (ABI) score was 53.0, down slightly from July’s score of 55.8. July’s score was the highest it’s been since 2007. This is good news for construction companies because the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. For the ABI any score above 50 indicates an increase in billings and any score below 50 indicates a decrease in billings.
For the Architecture Billings Index, all regions were above 50 in July and August. The Northeast region led the way and increased from 55.5 in July to 58.1 in August. The South region remained at 55.1. All sectors were above 50 for July and August with Residential leading the pack at 56.5 in July and 58.1 in August.
Construction spending has been up and down over the last few months, but it shouldn’t cause too much of a concern. The August 2014 annual rate of $961.0 billion is 5.0 percent higher than the August 2013 estimate of $915.3 billion. If construction spending continues at its current rate of $961.0 billion through the rest of the year, construction spending in 2014 will be about 5.5 percent higher than the amount spent last year.
Despite the erratic construction spending over the past few months, the industry has added jobs every month so far this year. The industry’s unemployment rate was 7 percent for September which is the lowest it has been in over six years. As we roll into the final quarter of 2014, it appears that the commercial construction industry is on solid footing and will continue to grow at a slow and steady pace.