FMI Announces Fourth Quarter Nonresidential Construction Index

FMI releases its fourth-quarter 2009 NRCI quarterly report tracking economic trends in the U.S. nonresidential construction sector based on the opinions and experience of top construction industry executives. The NRCI is scored on a 100-point scale with a score below 50 indicating contraction and a score above 50 indicating growth.

The index for 4Q09 is 47.7, a positive move from the 3Q09 reading of 44.8. While the near-term outlook for most construction markets remains weak, healthcare, education and “other” show some relative growth potential next year. For commercial and lodging markets, panelists believe it will take all of three years to make a comeback. One market that has remained relatively strong throughout the downturn is the miscellaneous mix of utility, infrastructure and sundry niche markets.

• Strategy: 62 percent of panelists still value long-range planning, and some credit those strategies for helping them prepare to thrive in the current downturn.
• Overall Economy: Panelists are seeing improvement with this index moving from 43.5 last quarter into positive growth territory at 52.1.
• Cost of Materials: With cost of materials up slightly, our index gauging the effect on contractors is down slightly from 63.8 to 59.4. Statistically, this is an improvement from a material supplier’s point of view, but it is a sign that either supply has decreased or demand has increased slightly.
• Cost of Labor: Cost of labor is slightly lower and appears to be stable from quarter to quarter with the current component index at 53.1.
• Productivity: The productivity component index is slightly lower at 61.0 from 62.4. This may be a sign that contractors are reaching the maximum efficiency that can be attained by working harder with fewer people.
• Delays and Cancellations: Delays and cancellations have remained stable since 1Q09, but this is not a good sign, as delays continue to affect 20 percent of projects, and cancellations are running at 10 percent, or more than three times what used to be considered “normal.”

Source: http://www.fminet.com/