CDCNews’ 3rd Quarter 2013 Construction Data Index

CDI_Header_3Q2013CDCNews’ 3rd Quarter Construction Data Index (CDI) has been compiled and based on responses received the current state of the commercial construction industry and future outlook by professionals is at the highest levels recorded all year. In addition to having the highest percentage of respondents stating that their business is doing better now than it was six months ago as we also have the highest percentage of respondents stating they feel their business will be doing better six months from now.

The construction industry continues to show improvement and growth. The annual rate of construction spending continued to rise during the third quarter of the year at its fastest pace in over four year. Construction employment also increased in September after unemployment levels hovered around 9.1 percent during June and July. All indicators are pointing to continued growth for the commercial construction industry as we head in the fourth and final quarter of the year.

Based on responses received when asked how your business is doing today relative to six months ago, 58 percent of respondents indicated that their business was doing better. In addition, 29 percent of respondents felt their business was doing about the same as it was six months ago and 18 percent felt that business was worse than it was six months ago.

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That is a five point increase over the 2nd Quarter CDI where only 53 percent of respondents felt their business was doing better now than it was six months ago and a nine point increase from the 1st Quarter CDI when it was only at 49 percent.  Even more impressive is the year-over-year increase of 18 points when only 39 percent of construction professionals felt their business was doing better then than it was six month prior in the 3rd Quarter 2012 CDI.

Respondents who felt their business was doing worse now than it was six months ago dropped four points from 18 percent in the 2nd Quarter CDI to only 14 percent during the 3rd Quarter. Professionals who felt their business was about the same as it was six months prior remained steady dropping from 29 percent in the 2nd Quarter to only 28 percent in the 3rd Quarter.

Future outlook from the 3rd Quarter CDI is at a record high with 64 percent of respondents indicating they see their business doing better than it is today six months down the road which will carry us through the end of the year and into the first quarter of 2014.

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Despite a slight decrease from the 1st Quarter CDI when 61 percent stated business would be better six months from now to 58 percent during the 2nd Quarter CDI future outlook has remained positive throughout the year. Comparing the 2nd Quarter CDI to the 3rd Quarter CDI respondents who felt business would be better in six months rose from 58 percent to 64 percent. Respondents who felt things would be worse dropped from 12 percent to 10 percent and those that felt things would be about the same in six months dropped from 30 percent to 26 percent. Taking a look at year-over-year numbers there was a 14 point increase from the 3rd Quarter 2012 CDI when only 50 percent of professionals who responded stated they felt business would be better over the next six months.

Taking a look at some of the other industry-leading indicators we find that construction employment gains slowed in the first two months of the quarter. The Bureau of Labor Statistics indicated that the construction industry added 3,000 jobs in July and only 2,000 jobs in August with unemployment at 9.1 percent during those two months. September saw a noticeable gain of 20,000 jobs being added decreasing construction unemployment to 8.5 percent.

FMI’s Nonresidential Construction Index Report for 3rd Quarter 2013 continues to show growth at 60.3 which is an increase of 0.2 points over 2nd Quarter 2013. This is the second straight quarter where the index has reached its highest point since its inception. Remember, any score above 50 indicates expansion, while any score below 50 indicates contraction.

FMI has also recently released their Q3-2013 Construction Outlook report in which they reduced their prediction for annual Construction-Put-In-Place (CPIP) for 2013. This report covers both residential and nonresidential construction. They are now predicting only a 6 percent growth over 2012 numbers which comes to about $909.6 billion in CPIP. Expected growth for 2014 is set to return to 7 percent and reach $977.1 billion CPIP.

The American Institute of Architectects’ Architecture Billings Index continued to show growth in July and August with scores of 52.7 and 53.8 respectively. There was growth in all regions and across all sectors during both months.  The Connercial/Industrial sector show had the highest scores among all sectors with a score of 54.2 in July and 54.8 in August. For the AIA’s index, a score of 50 indicates no change from the previous survey period. Scores above 50 indicate an increase and scores below 50 indicate a decrease in billing.

The Turner Building Cost Index, for the twelfth quarter in a row, reported an increase in costs.  For 3nd Quarter 2013 it rose to 868 which is up 1.05 percent from the 2nd Quarter when it was at 859 and up 4.33 percent from 3rd Quarter 2012 when it was at 832. The Turner BCI measures costs in the nonresidential building construction market in the United States.

The U.S. Commerce Department just released its estimated construction spending numbers for August after being delay a couple of weeks due to the government shutdown. August’s annual rate was estimated at $915.1 billion climbing 0.6 percent over July’s revised number of $909 billion which was a 1.4 percent increase over June.

Despite being only a couple of weeks into the final quarter of the year the country has already had to face a 16-day shutdown of the federal government. In addition was the more concerning as the 11th hour vote by Congress to again raise the debt ceiling to avoid a technical default by the government the result of which could have created another recession which would definitely have a negative impact on all the positive growth the construction industry has seen so far this year. Assuming that Congress can get together and play nice long enough to get a budget hammered out and figure out a more permanent solution to the debt ceiling, the economy and the construction industry should continue to improve as we finish out the year and head into 2014. The biggest concerns going forward for the construction industry as a whole appear to be what affect the Affordable Care Act will have and whether or not the issue of immigration reform will be taken up any time soon and how it will impact the number of construction workers granted visas to work legally in the country.

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 professionals working in the commercial construction industry on a monthly basis. The survey asks two questions:

  1. 1.      How is your business doing, relative to six months ago?
  2. 2.      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 project 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.

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