Industry Sees Recovery Ahead After Four Years of Gloom

The market recession has severely tested the confidence of the normally optimistic construction industry. Four years of struggling markets have taken a toll. However, the slow-but-steady recovery of the U.S. economy has many firms in the industry now believing that the worst is behind them and that a broad recovery is poised to begin.

The recovery of the industry’s optimism can be seen in the most recent ENR Construction Industry Confidence Index survey. The first-quarter 2012 CICI rose to 58 on a scale of 100, up 16 points from 42 in the last quarter. (A CICI rating of 50 would represent a stable market.) The 464 executives of large construction and design firms responding to the survey believe the market has stabilized and is beginning to show signs of recovery.

The CICI measures executive sentiment about the current market as well as projections for 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 Feb. 22 to March 12.

The CICI also measures sentiment about the overall U.S. economy as a leading indicator of future trends in construction. In the first quarter, confidence in the U.S. economy rose to a CICI rating of 64, from 49 in the last quarter, showing that respondents in the industry believe the economy is on the right track.

Another sign of the industry’s optimism is that, while only 19% of respondents say the market is continuing to decline, 21% believe the market now is improving. While respondents are not ebullient about near-term prospects, 31% believe the market will improve in three to six months’ time, compared to 12% that believe it will still be in decline.

However, the industruy’s expectations for the market in 2013 may be cause for real excitement. Only 6% of respondents believe the market will continue to be in decline in 12 to 18 months, while 53% say it will be improving.

Private Sector To Lead Recovery

Applying the CICI formula to individual market sectors shows that respondents believe the private-sector markets will lead the recovery. The petroleum market is perceived to be the strongest, with a CICI rating of 76, followed by multi-unit residential and power, both at 71, and health care at 69.

The retail market, once the lowest-rated market, rose to a CICI rating of 51, showing some optimism that this sector finally has stabilized, while the commercial office market was rated at 47, up from 39 in the fourth quarter. The only market to fall was the entertainment and theme-park sector, which dropped a point to 41.

CFMA Survey: Cautious Optimism

Gary J. Tulacz has been, since 1993, senior editor in charge of ENR's Top Lists, which bring structure to the huge global construction industry through annual surveys and market analysis of its key segments and major players. The array of surveys rank companies, based both in the U.S. and outside, which perform general contracting, specialty contracting, engineering, architecture and environmental services, among other specialties.

The rankings, based on annual revenue from work at home and abroad, are further divided into specific market categories. Click here for descriptions and schedules of ENR Top List surveys and access to information on current and past listed firms.

Gary also created the ENR Top 100 Green Contractors and Design Firms rankings and the ENR quarterly Construction Industry Confidence Index that measures firm executives' market outlook.

This survey data is used by industry firms and other businesses, government agencies and academics also to gauge the health of the global construction market.

A graduate of Fordham College in New York City and the Fordham University School of Law, Gary previously wrote extensively on employee relations in such areas as labor and immigration law and employee drug testing.

Post a comment to this article

Enhancing Collaboration and Surpassing Traditional Design-Build Methods with Progressive Design-Build

Earn: 1 PDH; 1 AIA LU/Elective; 0.1 IACET CEU

Progressive Design-Build is reshaping large infrastructure projects by addressing key issues with the traditional Design-Build approach. We'll explore how PDB fosters collaboration between owners, design-builders, and design teams to develop a well-defined scope and budget, plus minimizes cost overruns and reduces liability claims.