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Index shows sustained nonresidential market strength

Except for the hint of a slight decline indicated at mid-year, commercial, industrial and institutional building activity continues at a steady pace, according to the Nonresidential Construction Index Report (NRCI) for Q3 2015 from leading management consultant FMI, and reflecting sentiments of construction executives nationwide.

 

“The industry continues to proceed on the recovery track, although it is showing signs of a minor deceleration,” says FMI President and Senior Managing Director of Investment Banking Chris Daum. “Despite the decrease in projected backlog and squeeze from rising material costs, executives in our industry are still bullish and hold positive outlooks overall.”

FMI’s NRCI for Q3 2015 dropped 1.3 points to 63.6 from the previous reading of 64.9 in Q2. The index paints a mixed picture of the nonresidential construction sector’s current state. On one hand, the NRCI component for the overall economy dropped 6.3 points to 70.6 points this quarter; while down from its peak, this component still indicates that panelists contributing to the index remain bullish about the economy. Similarly, indicators for the economies where panelists do the most business stood at 73.3, indicating a strong outlook despite a slight 3.4-point slip.

NRCI Q3 highlights point to diverse forces driving the industry as construction interests approach the 2015 sunset: panelists’ views on their businesses are solidly positive with little changed from the last quarter; while their principal business sector slipped 1.4 points to 75, they remain optimistic on nonresidential building prospects.

The index confirms that all sectors within the construction industry continue their recovery since the financial crisis, with companies making numerous adjustments to their businesses in the intervening recession. Posted at www.fmi.net, the NRCI Q3 report summarizes how business adapted during the recession, employing such strategies as greater selectivity regarding projects and clients; greater use of technology for their businesses to drive productivity; and, stronger risk management coupled with decisions factoring global geopolitical and economic conditions.


BUILDER CONFIDENCE

Led by a strong jump in single-family production, nationwide housing starts inched up 0.2 percent to a seasonally adjusted annual rate of 1.206 million units in July, according to U.S. Department of Housing and Urban Development and Commerce Department data. Single-family starts rose 12.8 percent to a seasonally adjusted annual rate of 782,000 units after an upwardly revised June reading, while multifamily work fell 17 percent to 424,000 units.

“[July’s] drop in the more volatile multifamily side is a return to trend after an unusually high June,” says NAHB Chief Economist David Crowe. “While multifamily production has fully recovered from the downturn, single-family starts are improving at a slow and sometimes intermittent rate as consumer confidence gradually rebounds. Continued job and economic growth will keep single-family housing moving forward.”