FMI's Nonresidential Construction Index Slips But Remains Positive for Q3 2011

RALEIGH, NC (August 22, 2011) – FMI's Nonresidential Construction Index (NRCI) slipped from 58.6 to a still positive 52.4 for the third quarter of 2011. The survey for the third quarter NRCI closed the week before the latest stock market slide, nevertheless FMI says uncertainty in the markets is reflected in the panelists’ responses.

Most components of the NRCI are down this quarter as backlogs slipped again from nine months back to just eight months. After setting the question aside for two quarters, FMI asked again about cancellations and delays due to owner financing difficulties. The response wasn’t much different from that received in the fourth quarter of 2010, except panelists noted delays weren’t caused as much by lack of financing now as uncertainty in the market and difficulties of getting projects approved and off the ground. Fewer cancellations were due more to not getting projects started and contractors taking more care to assure project financing is in place before starting projects. 

FMI asked about the connection between residential construction and nonresidential construction as well as anticipated changes in infrastructure construction due to expected government budget cuts. Most panelists said there is still a bond between nonresidential construction activity and residential, but the ties might be weaker than in the past. Nonetheless, few expect there to be a strong recovery for nonresidential construction -- especially the commercial segment -- until residential gains traction.

Infrastructure construction is expected to pull back in all levels of government. Many panelists noted that this was probably necessary, but also indicated governments' failure to recognize the potential benefits that good infrastructure projects can have on the economy and jobs. If there was one concern reflected in the results this quarter, it was the uncertainty echoed in governments’ lack of direction, stifling owners’ decisions to invest in capital improvements and infrastructure.

Click here to download a copy of FMI's full Nonresidential Construction Index report. For reprint permission or to schedule an interview with the author, please contact Sarah Vizard at 919.785.9221 or svizard@fminet.com.

FMI is a management consultant, investment banker and research agency to the engineering and construction industry. The company works in all segments of the industry providing clients with strategy development; market research and business development; leadership and talent development; project and process improvement and merger, acquisition and financial consulting.

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