Construction Industry Market Confidence Steady

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For many in the industry, the construction market seems to have stabilized and is beginning to show signs of life. However, there are concerns among owners, both public and private, about the availability of funds to launch new capital programs. So the construction industry believes that any significant rebound will not come until 2013.

The most recent ENR Construction Industry Confidence Index survey shows the industry's guarded optimism. The second-quarter 2012 CICI fell two points from the first quarter to 56 on a scale of 100. (A CICI rating of 50 would represent a stable market.) The 449 executives of large construction and design firms responding to the survey believe the market has stopped falling and is showing signs of growth.

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 May 24 to June 11.

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 55, from 64 in the last quarter. This rating marks the first time that CICI repondents' confidence in the overall economy was lower than their confidence in the market.

There is still a great deal of uncertainty regarding the current market. Recent pessimistic reports about the economy, including an unexpected rise in the unemployment rate, have given owners pause, according to some respondents. "Our markets are tending to improve, but I think the general economy will not," says an executive at one large Midwestern specialty contractor.

Many respondents say that some projects are on hold, pending the results of this year's presidential election, when there will be more certainty about the direction Washington will take. "It's a presidential election year. Not much will change until 2013," says an exec at a mid-size engineer-contractor in the South.

As for the current market, slightly more respondents (24%) believe it is still in decline; however, 21% believe it is growing. But 29% believe the market will be growing by the end of the year, compared to the 20% who believe it will still be in decline.

The industry's expectations for the market in 2013 remain high. Only 8% of respondents believe the market will continue to be in decline in 12 to 18 months, while 57% say it will be improving.

CFMA Survey: CFOs Wary

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.

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.

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