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Blog/December 12, 2013

Nonresidential Construction Index Fourth Quarter 2013 Highlights

After hitting its highest marks in the last two quarters, the NRCI dropped 2.9 points in the fourth quarter to 57.4, or 1.9 points ahead of the fourth quarter of 2012. To explain the drop, we offer the idea that investors are taking a break after five quarters of improvement. That approach seems to work when it comes to the stock market. It is more likely that the slight drop in the NRCI this quarter is due to owners continuing to act with an abundance of caution, along with the banks that help finance their projects. Why be so cautious when many of the major indicators continue to be positive? We live in a time of political infighting and uncertainty where ideology trumps common sense, and that causes a political mess, which in turn keeps investors’ money under the mattress.

Business does not work on a political schedule, or at least not well when politicians spend more time stumping for their next election than they do working on the real problems of the nation. Government does not work like a business, but it should work more like one. Those observations are at the core of what we learned when we asked panelists about the government shutdown and the budget ceiling crisis this quarter.

Productivity is something the government should work harder at improving to get the best deal for the public investment. So should contractors, according to our Current Issues questions about productivity improvement. The productivity component of the NRCI has been working its way down since the overall Index started indicating growth in nonresidential building construction. Some panelists responded that they are always working to be more productive, not just responding to tighter markets and margins. However, as expected, most are discovering productivity as a new mantra to try to regain margins and do more with less. Ultimately, productivity is one of the keys to growth and improving profit margins in the “new normal” economy, where everything is subject to rapid change. More focus on collaboration and productivity will be a refreshing change for both government and businesses.

So why has the NRCI dropped this quarter? The idea that investors are taking a break may be as good as any explanation at this point. The index is still 2.1 points higher than this time last year, but it bears watching. Maybe the Index is just taking a few steps back in order to get a running start to cross the hurdles in the economy next year.

To read the report in its entirety, please go to:

http://hale.sg-host.com/media/pdf/forecasts/NRCI_Q4_2013.pdf

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