ENR�s CICI: Industry Believes That the Worst May Soon Be Over
The recession that everyone hoped would end quickly has now lasted for two years, transforming the initial fear and concern in the construction industry to grit and determination to hold on until better times. While no one sees the current market as ready to take off, major firms are beginning to think that the market may soon hit bottom and begin slowly to pull itself back from the brink in 2011.
The ENR Construction Industry Confidence Index (CICI) for the second quarter of 2010 shows that 555 executives from major construction and design firms believe that, while the market continues to flounder, next year it will be on the rise.
The index for the second quarter of 2010 rose dramatically to 41 on a scale of 100 from 34 in the first quarter and a 10-point rise over the fourth quarter of 2009.
The CICI measures industry sentiment about the current market and beliefs about where it will be in three-to-six months, and over the next 12- to 18-month period. An index of 50 would mean a stable market. The CICI is based on responses to surveys sent to more than 2,000 U.S. firms on ENR�s lists of leading contractors, subcontractors and design firms. The current index is based on a survey conducted over a two-week period earlier this month.
While 53% of all respondents say the market still is in decline, this is an improvement over the first quarter when 68% saw a declining market. Further, only 37% believed that the market would continue to decline over the next three-to-six months, compared to 45% in the first quarter. As in past surveys, designers continue to be more optimistic about a turnaround in the near term than general contractors or subcontractors.
Infrastructure markets continue to be seen as the healthiest, with power (64), hazardous waste (63) and water, sewer and wastewater (62) as the strongest.
With regards to buildings, survey respondents showed increased confidence in almost all market sectors measured by the survey:
- Health care was the market that survey participants were most confident about, earning a rating of 65.
- The only other buildings market in positive territory was higher education at 52.
- The rating for K-12 education sector remained steady at 47 in the 2nd quarter.
Applying the CICI rating formula, only the petroleum market, rocked by economic and regulatory uncertainties in the wake of the BP oil spill in the Gulf of Mexico, saw a significant decline. It fell from 51 on a scale of 100 in the first quarter to 44. The only other market sector to lose ground was transportation, going from 55 to 54. The slight drop in rating for transportation may come in part from the fact that much of the federal stimulus money now is contracted and also because, with a growing concern about budget deficits during the upcoming congressional election campaign, few hold out hope for a federal highway reauthorization bill to be passed this year.
While most markets in the buildings sector gained over the past quarter, respondents continued to believe the recovery in that sector still is a long way off. The only big improvement in attitudes in the buildings sector was multi-unit residential, which rose from a 31 rating to 39. Other buildings markets still clearly in recession nonetheless made some progress in the views of executives answering the ENR CICI survey.
Among these building markets, none scored better than a 30 rating. Distribution and warehouses improved from 26 in the first quarter to a 30 rating. The entertainment and cultural market rose from 24 to 29, retail moved up from 21 to 28, while hotels and hospitality (up from 21 to 25) and commercial office (up from 20 to 24) markets were perceived to be the weakest through at least the end of 2011.