FMI Releases First Quarter Nonresidential Construction Index

FMI (www.fminet.com), the largest provider of management consulting and investment banking to the engineering and construction industry, announced the release of its Nonresidential Construction Index report for the first quarter of 2012.

The NRCI gained 7.8 points over last quarter to 58.1 this quarter. This positive move to start the New Year is not exactly the sign of a bull market for construction, but rather continuing confirmation that panelists believe the construction activity is following the lead of the slowly improving economy. There are good signs in hiring plans for 2012, as well as construction-put-in-place predictions. However, panelists indicate that low project pricing and high competition is still driving the market place.

  • Hiring: A five percent increase over this time last year, 42 percent of panelists indicated a zero to five percent increase in full-time direct employees. Additionally, fewer panelists indicated a reduction in salaried employees.
  • Construction Put In Place: Expectations for CPIP are positive but cautious, as 41.3 percent of panelists expect growth of 0.5 to 2.5 percent for 2012.
  • Overall Economy: The component for the overall economy showed the strongest improvement of all index components with a jump from 43.6 last quarter to 68.7 in the first quarter, a 25 point gain. This score reflects the improvement in many economic indicators including the unemployment rate.
  • Nonresidential Building Construction Market Where Panelists Do Business: At just 54.9, the local markets for nonresidential construction are inching ahead. However, panelist responses reflect a perception that their own business is performing a bit better than the overall nonresidential construction market. This indicates that local markets are still very competitive.
  • Cost of Materials: Despite a slow economy, material costs continue to rise, with no panelists indicating material costs were lower than last quarter. The cost of materials component moved down nearly 5 points to 26.2 percent. This factor is continuing drag on the overall index and is likely to raise the cost of projects while lowering profit margins for contractors.
  • Cost of Labor: The cost of labor improved just slightly to 41.5 percent, indicating little change over the score of 40 percent last quarter. However, no panelists indicated they were experiencing lower labor costs.
  • Productivity: Contractors are continuing to make moderate gains in productivity. However, at 52.9 percent, this component is still too weak to offset rising costs for labor and materials.

About FMI

FMI is the largest provider of management consulting, investment banking and research to the engineering and construction industry. We work in all segments of the industry, providing clients with value-added business solutions, including:

  • Strategy Development
  • Market Research and Business Development
  • Leadership and Talent Development
  • Project and Process Improvement
  • Mergers, Acquisitions and Financial Consulting
  • Compensation Data and Consulting

Founded by Dr. Emol A. Fails in 1953, FMI has professionals in offices across the U.S. FMI delivers innovative, customized solutions to contractors; construction materials producers; manufacturers and suppliers of building materials and equipment; owners and developers; engineers and architects; utilities; and construction industry trade associations. FMI is an advisor you can count on to build and maintain a successful business from your leadership to your site managers. For more information, visit www.fminet.com.

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