ENR Confidence Index Suffers a Small Drop
Like Charlie Brown trying to kick that football, construction executives in recent years have hoped for different results—every year hoping that this would be year the industry would bounce back from the prolonged doldrums that began in 2008. But just like Lucy snatching back the pigskin, by the third quarter of each year, economic reality would set in and market confidence would plummet.
The ENR Construction Industry Confidence Index survey has tracked the trend. In 2010, for the first time, the CICI index entered positive territory in the second quarter, only to plummet back to a negative outlook in the third quarter. In 2011, the CICI hit a record high for optimism in the first quarter, only to drop precipitously in the third quarter. The CICI again started 2012 with high hopes, only to fall to neutral by the third quarter.
This year, things are different. In the first quarter, the CICI index stood at 59 on a scale of 100, an indicator of a perceived recovering market. In the second quarter, the index hit 69, an indication of a growing market. Now, ENR's most recent CICI survey shows the industry still believes the market is experiencing a sustained recovery.
The third-quarter 2013 CICI did decline, but only by two points, to 67 on a scale of 100, which still represents a growing market. A vast majority of the 375 executives of large construction and design firms responding to the survey believe the market is in full recovery. Only 11% believe the market is currently in decline, while 39% believe it is growing.
The CICI measures executive sentiment about the current market and 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. 27 to Sept. 16.
For the second quarter in a row, the surveyed industry executives believe nearly all the market sectors measured by the CICI are now in a growth mode. For the CICI survey, execs were asked to assess current and future market prospects in general and any of 15 market sectors in which they currently work. In all 15 of the survey's markets, more executives saw growth in their particular market sector than those in the same sector saw decline.
Another positive sign is that all market sectors had a CICI rating over 50, indicating expected market growth over the next 18 months. The petroleum market was the highest rated, with a CICI rating of 81, followed by multi-unit residential and power, both at 74, and the environmental/hazardous-waste market, at 67.
The K-12 education market and the entertainment/theme parks/cultural market were both judged to the be the weakest, with a rating of 55. The biggest drop in ratings—down five points—was multi-unit residential, last quarter's strongest market. Many executives responding to the survey worried this market is becoming overbuilt.
CFMA Survey Indicates Slow Recovery
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.