FMI, provider of management consulting and investment banking to the engineering and construction industry, announces the release of its Nonresidential Construction Index (NRCI) report for the third quarter of 2011.
The NRCI slipped from 58.6 to a still-positive 52.4 for the third quarter of 2011, according to the company. Note that the survey for the third quarter NRCI closed the week before the latest stock market slide, but the 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 as well as contractors taking more care to assure project financing was in place before the project got started.
For its “current issues” questions this quarter, FMI asked about the connection between residential construction and nonresidential construction as well as expected 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 until residential gets more traction, especially for commercial construction.
Infrastructure construction is expected to pull back in all levels of government. Many panelists noted that this was probably necessary, but also amounted governments’ inability to recognize the potential benefits that good infrastructure projects can have on the future of the economy and jobs. If there was one concern reflected in the results this quarter, it was the stifling excess of uncertainty echoed in governments’ lack of direction, stifling owners’ decisions to invest in capital improvements and infrastructure.