McGraw-Hill Construction industry confidence index declines

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With the American presidential election less than two months away, the construction industry has taken a wait-and-see attitude about the markets. Many top construction executives believe the market will stay in a holding pattern until the election results come in and the new administration’s spending and regulatory priorities and the direction of the economy become clear.

The most recent Engineering News-Record Construction Industry Confidence Index survey shows the industry’s uncertainty. The second-quarter 2012 CICI fell six points from the first quarter to 50 on a scale of 100, which represents a flat market. The 378 executives of large construction and design firms responding to the survey believe the market will not begin to show signs of growth until the end of 2013.

The CICI measures executive sentiment about the current market and reflects their views on where it will be in the next three to six months and over a 12- to 18-month period. The index is based on responses to surveys sent out to more than 3,000 U.S. firms on ENR’s lists of the leading contractors, subcontractors and design firms. The latest results are based on a survey conducted from Aug. 28 to Sept. 10.

The CICI also measures sentiment about the U.S. economy, a leading indicator of future construction trends. In the second quarter, confidence in the U.S. economy fell to a CICI rating of 51, from 55 in the last quarter. In the first quarter of 2012, it stood at 64, which hinted at a significant recovery in the economy that did not materialize.

For many industry execs, the election cannot happen too soon. “We need to get this behind us so that the uncertainty ends,” says one large subcontractor.

As for the current market, 32% of industry execs polled believe it is still in decline, while only 17% believe it is growing. Only 25% believe the market will be growing within the next six months, while an equal number believe it still will be in decline. However, 51% believe the market will be on the upswing by the end of 2013, compared to only 8% of respondents who believe the market will continue to be in decline in 12 to 18 months

Project financing is key for the industry, but there are signs credit may be loosening. As part of its survey, ENR asked whether project financing is more or less available that it was six months ago. Survey respondents continue to believe project financing has stabilized. For the second quarter, 22.2% said project financing was getting easier, while 16.6% said is was tougher. However, project financing remains tight; until it becomes more readily available, the recovery will be slow.

Among the individual sectors, the CICI survey shows that respondents are a little less confident. However, private-sector markets once again were considered the most active. Applying the CICI rating formula, the power sector was up three points, to 69, tying it with petroleum (up one point) and multi-unit residential (also up one point) as the strongest markets as perceived by the survey respondents. The hospital/health-care market also is seen as being strong, but it fell in the third quarter by three points, to a CICI rating of 65. The only other market showing significant gains was the environmental/hazardous-waste sector, which rose three points, to 58.  Read More.

 

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