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Construction Industry Confidence Index Declines in Third Quarter

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With the American presidential election less than two months away, the construction industry has taken a wait-and-see attitude about the markets. Many top construction executives believe the market will stay in a holding pattern until the election results come in and the new administration's spending and regulatory priorities and the direction of the economy become clear.

The most recent ENR Construction Industry Confidence Index survey shows the industry's uncertainty. The second-quarter 2012 CICI fell six points from the first quarter to 50 on a scale of 100, which represents a flat market. The 378 executives of large construction and design firms responding to the survey believe the market will not begin to show signs of growth until the end of 2013.

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 Aug. 28 to Sept. 10.

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 51, from 55 in the last quarter. In the first quarter of 2012, it stood at 64, which hinted at a significant recovery in the economy that did not materialize.

For many industry execs, the election cannot happen too soon. "We need to get this behind us so that the uncertainty ends," says one large subcontractor.

As for the current market, 32% of industry execs polled believe it is still in decline, while only 17% believe it is growing. Only 25% believe the market will be growing within the next six months, while an equal number believe it still will be in decline. However, 51% believe the market will be on the upswing by the end of 2013, compared to only 8% of respondents who believe the market will continue to be in decline in 12 to 18 months.

CFMA Members Pessimistic

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. While a Confindex rating of 100 indicates a stable market, higher ratings show growth is expected.

"Our Confindex fell from 124 to 116 [on a scale of 200] for the second quarter," says Stuart Binstock, CEO of CFMA. In the first quarter of 2012, the Confindex hit 131. He notes that all four components making up the Confindex declined.

"There was no good news in this quarter's results. It was a clean sweep of declines," says Binstock. He says part of this pessimism may stem from the makeup of CFMA's members, noting that its members are mostly CFOs who deal in hard numbers and facts and dislike uncertainty. "And there is a lot of uncertainty in the immediate future," he says.

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