The Nonresidential Construction Index is the same as it was when we entered 2012, according to FMI, a provider of management consulting and investment banking to the engineering and construction industry. That means 2013 might be close to a carbon copy of 2012 for nonresidential construction, although there are signs of a slight uptick in optimism.
For example, more panelists in the survey expected hiring to increase and nearly 20% are predicting stronger growth than they did last year. Still, there is quite a disparity among panelists in their optimism, largely due to the wide variety of projects and major differences among contractors in this segment. Store front and mall builders will face strong competition while those building energy projects and data centers won’t. And while larger contractors face a declining backlog, that’s offset because they usually work on bigger and better funded projects, and have stronger marketing efforts than the smaller ones. Meanwhile, a quarter of the smaller contractors have backlogs that are better than the median.
The leading bright spots appear to be housing, energy and manufacturing. The trend of pessimism about labor and material costs continues to reign though, as it has since Q2 of 2012.
The in-depth look at hiring showed about 70% of panelists expect to keep the same staff or increase staff up to 10% over current levels. Nearly the same percentage don’t expect changes in health care laws to affect their hiring plans while 15% do. About 8% said health care requirements will make it harder to grow their companies and 3% said they would rely more on contract labor. More than 50% said they would not be reducing spending regardless of the outcome of the debt ceiling debate.
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