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News/August 29, 2016

FMI Nonresidential Construction Index Drops 4 Points in the Third Quarter

NRCIBannerQ3_2016

Raleigh, NC, September 29, 2016

FMI’s NRCI dropped 4 points in the third quarter to 57.3. That score is well within growth range with a value above 50. However, over the past four quarters, we are seeing greater variability compared to previous years. While most components in the index are still in a positive range, scores have dropped consistently since the last quarter.

Predicting the recession: We asked panelists to give their opinion about when they think the next recession will begin, specifically in the construction industry. Overall, 78% didn’t expect a recession until at least the first half of 2018, and 38% of those respondents didn’t expect a recession for at least two years.

NRCI Third Quarter 2016 Highlights:

Overall Economy: NRCI Panelists’ view of the overall economy dropped 7.3 points in the third quarter. This is a sharp drop from the second quarter results.

Overall Economy Where Panelists Do Business: As with the overall economy, panelists’ optimism in the second quarter seems to have pulled back to what we have seen in previous quarters. Now at 60.4, this NRCI component continues to hover in a positive range.

Panelists’ Construction Business: Panelists’ reported that their outlook for their own business slowed somewhat this quarter, dropping 5.1 points to 70.9. A few actually welcomed the change since some markets have been “overheated.”

Nonresidential Building Construction Market Where Panelists Do Business: At 67.3, the nonresidential market in which panelists work is still registering high on the component scale, but 7.0 points lower compared to last quarter.

Expected Change in Backlog: The index component for expected change in backlog dropped 7.2 points in the third quarter to 58.9. The median backlog for all panelists was 10 months for the third quarter, which is a drop from the last three quarters but on par with the past two years, where backlog hovered between nine and 10 months.

Cost of Construction Materials and Labor: The index for materials costs dropped 2.9 points, indicating materials prices are still rising. Likewise, the labor cost component, although unchanged from last quarter, continues to indicate higher labor costs due to persistent labor shortages.

Productivity: Productivity continues to be a big concern as the component index slipped to 46.5, or 5.9 points below last quarter’s results. This is the lowest score for productivity since we began publishing the NRCI report in 2008.

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