The CICI findings parallel the soon-to-be-released results of the latest Confindex survey from the Construction Financial Management Association, Princeton, N.J. CFMA polls 200 CFOs from general contractors, subcontractors and civil contractors. (A Confindex rating of 100 indicates a stable market.) Higher ratings show growth is expected.
“Our Confindex rose from 116 to 126 [on a scale of 200] for the first quarter,” says Stuart Binstock, CEO of CFMA. However, the Confindex stood at 131 in the first quarter of 2011.
Binstock says the CFMA survey shows the industry is starting to become more confident. “We are seeing members begin to worry about future staff shortages and materials price increases as the market recovers, rather than just surviving,”
Binstock says.
CFMA members continue to be wary. “In the first quarter of 2011, all the indicators pointed to a general economic recovery. But then we were hit by the Japanese tsunami, the fight in Congress over the debt ceiling, the debt crisis in Greece and a falling stock market,” says Anirban Basu, CEO of Baltimore-based economic consultant Sage Policy Group Inc. and an economic adviser to CFMA.
This cascade of events led to a tightening of credit and a drop in construction prospects. “CFOs see real prospects of economic recovery now, but [they] remember the tumult of last year and are wary of being too exuberant,” Basu says.
However, as Basu points out, the economy is now adding as many as 200,000 jobs a month, and vacancy rates in many cities are beginning to fall. Such news bodes well for the industry.
ENR also asked whether respondents were experiencing increases in materials prices, and 71.1% said yes. Fuel and
petroleum-based products were among the most commonly cited. However, many respondents said they were seeing pricing pressure on steel, copper, concrete and drywall.
Only the financial conditions index lags behind the rest of the CFMA Confindex’s indicators, Binstock notes. He says that while most economic conditions point to a general recovery in the market, bank financing remains tight. Until project financing becomes more readily available, the recovery will be slow.
As part of the survey, ENR asked whether financing for projects is more or less available that it was six months ago. For the first time since the question was posed two years ago, survey respondents said project financing has stabilized. While only 16.6% said project financing has become tougher, 21.1% said access to capital now is easier.
“Capitalism thrives on capital,” says Basu. “CFOs see business conditions that are causing the demand for construction to rise, but until the banks free up capital for projects, market growth will only be in the 2% to 3% range.”
