Quarterly report from FMI Corp. indicates little change; chances of a significant rally anytime soon seem unlikely
By Kevin Doyle
This is not what those in the construction industry envisioned when unveiled his $787 billion American Recovery and Reinvestment Act at the Illinois headquarters of beleaguered Caterpillar on a bleak February day.
The stimulus money was supposed to help reinvigorate the economy, especially the construction sector that has suffered so miserably through the downturn. However, FMI Corp.’s latest quarterly survey of executives in the nonresidential construction industry indicates that while the market appears to have stabilized somewhat, it does not look ready to mount a rally anytime soon.
The Raleigh company released its Nonresidential Construction Index report for the third quarter of 2009 on October 26th. The responses to FMI’s survey produced an index score of 44.8 on a 100-point scale. A score above 50 indicates growth. A score below 50 shows contraction. The index was essentially unchanged from its second-quarter reading of 45.
“The results lead us to think we are seeing the bottom of this recession for nonresidential contractors,” said FMI Chief Executive Hank Harris Jr. “However, there isn’t much this quarter indicating recessionary conditions are going to end soon.”
“The hope for a quick recovery has faded, and contractors are now trying to keep backlogs full while facing increasing competition,” the FMI report stated.
Observations from the report indicate that labor costs appear to be stabilizing and showing some signs of rising. Materials prices are also stabilizing, with 60 percent of the panelists reporting no change from the previous quarter.
Confidence in the overall economy improved from 34.9 in the second quarter to 43.5 in the third quarter.
Construction backlogs, however, have declined from a median of nine months last quarter to eight months in the third quarter. Delays and cancellations of projects also continue to plague the industry.
Source: www.bizjournals.com