4th Quarter 2014 Construction Data Index

2014_CDI_4thOur 4th Quarter 2014 Construction Data Index is completed and we finished out the year strong with a majority of respondents, 88 percent, stating that business was doing as good or better than it was six months ago. Future outlook was the highest ever recorded in the 4th Quarter with 66 percent of respondents stating that they expect to be doing better in six months which is a great way to start 2015.

The construction industry added 84,000 jobs in the 4th Quarter according to the Bureau of Labor Statistics. This was second only to the 125,000 jobs added in 1st Quarter 2014 and a big improvement over 4th Quarter 2013 when only 44,000 jobs were added. December saw the biggest gains during the quarter with 44,000 jobs added. This was more than the combined total of 30,000 jobs added in November and 10,000 in October.

According to the U.S. Census Bureau, construction spending reached a seasonally adjusted rate of $982.1 billion through December 2014. This is up from the revised November estimate of $978.6 billion, and is 2.2 percent higher than the $961.2 billion recorded for December 2013. Total construction spending for the year was $961.4 billion which is 5.6 percent higher than the $910.8 billion spent in 2013.

When asked how your business is doing today relative to six months ago, a slight majority, 53 percent, of respondents indicated that their business was doing better. This is the highest percentage we’ve had reporting that business was better now compared to six months ago in any of our previous 4th Quarter surveys and also the first time a majority of respondents indicated things were better. Of the remaining responses, 35 percent indicated that business was about the same now as it was six months ago and 12 percent indicated that things are worse now than they were six months ago.

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When asked how they feel their business will be doing six months from now, 66 percent of respondents indicated their business would be doing better. Again, this is the highest percentage recorded for a 4th Quarter survey. Only 26 percent of respondents felt their business would be doing about the same in six months’ time and 8 percent stated they expect things to be worse six months from now.

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Based on some of the comments received with the survey responses, a good number of companies have seen marked improvements in 2014 and have built a healthy backlog. We are seeing more companies indicating that they have already had to add more headcount or are planning on doing so in 2015. The construction industry isn’t recovering at the same pace throughout the country as we still have some respondents indicating that growth has been sluggish.

Turning to some of the other leading industry indicators, 2015 should be another year of overall increased activity in the commercial construction industry. FMI’s Nonresidential Construction Index Report for 4th Quarter 2014 was back on the rise to 62.8 points, slightly higher than the 62.5 for 3rd Quarter 2014. Any score above 50 indicates expansion, while any score below 50 indicates contraction. This is also 2.2 points higher than the 4th Quarter 2013 score of 60.3.

FMI is predicting that growth will continue in 2015 at a 7 percent rate and for total construction put in place to exceed $1 trillion.

The American Institute of Architects’ (AIA) Architecture Billings Index (ABI) score was at 52.2 in December, 50.9 in November and 53.7 in October. This marks eight straight months of increased design activity going back to May. This is great news for construction companies because 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.

Two other indicators that we haven’t mentioned in quite some time in our CDI, the ABC Construction Backlog Indicator (CBI) and the Turner Building Cost Index, are also showing positive signs for the future. The 2nd Quarter 2014 CBI set a record high of 8.5 months of backlog only to be surpassed by the 3rd Quarter 2014 CBI which recorded 8.8 months of backlog. The Turner Building Cost Index, which measures nonresidential building costs, was at 917 for 4th Quarter 2014. This is 0.99 percent higher than the 908 recorded in 3rd Quarter 2014 and 4.45 percent higher than the 4th Quarter 2013 score of 878.

Everything is pointing to a great year for the construction industry in 2015. Construction spending could break the $1 trillion mark and construction employment is expected to outpace the 338,000 jobs added in 2014. Despite the improvements in construction employment we are still a couple of years away from gaining back the more than 1 million jobs shed in 2009. We should make some positive headway this year by adding back another 350,000 to 375,000 jobs in 2015.

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.

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