FMI, a provider of management consulting and investment banking to the engineering and construction industry, released its “Construction Outlook: Second Quarter 2011” report.
The report states that there are signs the economy is recovering – even for contractors – but you have to look hard to see them. The stock market has taken on a more bullish trend since the bottom of the recession, but that bull has yet to visit Main Street, which is struggling to fix the potholes, not to mention the infrastructure buried beneath the streets.
The cost of construction materials has been rising faster than the slow increase in construction activity would suggest. Recently, commodities investors woke up to the idea that the recovery may once again be delayed. Their concerns are justified when one considers the uncertainties in the news, including a slowdown in GDP growth to just 1.8 percent after a solid fourth quarter pace of 3.1 percent.
Construction markets are also affected by national and global uncertainties including the ongoing political upheaval in the Middle East and northern Africa; the resurgence of concern over the European debt crises, particularly Greece; and the ongoing budget battle in the U.S. Congress.
Report highlights include:
- Total construction in 2011 will climb 2 percent after declining 9 percent in 2010.
- Construction employment remained abysmal and little changed since the depth of the recession.
- The nonresidential sector will decline just 2 percent in 2011 after a 19 percent decline in 2010.
- Most of the areas showing growth, excluding residential, are in markets related to infrastructure.
- Sewage and waste disposal, and conservation and development construction will contribute to a positive climb in the nonbuilding segment.
- Power will continue to be a growing construction market (2 percent growth for 2011) as there is no sign that our need for more of it will abate. We expect growth to accelerate over the next five years as more attention is paid to renewable energy sources.
- The much-expected nuclear renaissance could stall once again as regulating bodies and engineers reassess safety measures based on the devastating results of multiple catastrophes at Japan's Fukushima nuclear plant.
FMI's Research Services Group is responsible for design, management and performance of primary and secondary market research projects and related research activities, including economic analysis and modeling, construction market forecasting and database management.