FMI Construction Reports Shows Optimism, but Challenges Remain

Raleigh, N.C.-based FMI has released the Nonresidential Construction Index (NRCI) for the second quarter of the year. The NRCI now stands at 45, compared with a reading of 35.6 for the first quarter. FMI reported that it appears construction industry executives participating as panelists for the NRCI survey are getting over the shock of the rapid slowdown and are beginning to rethink their markets and strategies. While there are some signs of optimism in the report, FMI reports that most panelists expect the remainder of 2009 to be a continuing challenge to find new work and keep from making even deeper staff cuts.

The federal stimulus has yet to be very stimulating for nonresidential contractors, the report said. Only 12 percent of panelists have seen any effects of the American Recovery and Reinvestment Act of 2009 (ARRA). “Delays and cancellations continue to plague the nonresidential construction sector, with few signs that banks are ready to free up credit for private-sector owners,” the statement continued. “While we received several comments that panelists expect the downturn to get even worse before it gets better, a few expressed their concern that we might be in for a rapid rebound at some point, which will also cause problems scaling back up.”

Panelists’ opinions of the overall economy improved considerably this quarter. Only 39.2 percent thought the economy had worsened since last quarter, compared with 79.6 percent in the first quarter of 2009. However, only 9.1 percent thought the economy was actually improving.

Last year, when the overall economy was declining, FMI noted that nonresidential contractors were doing pretty well in comparison. But as of the second quarter 2009, panelists participating in this survey largely agree their business is as slow as business in their overall markets.

The reduction in materials costs may be near the bottom, as only 58 percent of panelists report material costs as lower compared with 70 percent last quarter. Labor costs, despite slowdowns and layoffs, seem to show early signs of increasing, but only 11 percent report labor costs as higher than last quarter.