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Construction Industry Bounces Back in 2013

Written By: Kendall Jones on April 26, 2013 One Comment

With the first quarter of 2013 already behind us the construction industry finally appears to be on a path of recovery and growth now that the recession appears to have ended. The industry has continued to add jobs each month throughout the first quarter of the year and construction spending during the first two months of 2013 is 6.6 percent higher than is was during the same time period in 2012.

The U.S. Labor Department’s employment report for March 2013 states that 18,000 jobs were gained during the month in the construction industry. This marks the tenth straight month of job growth for the industry. The construction industry gained 94,000 jobs through the first quarter of 2013 with 48,000 jobs added in February and 28,000 in January. There have been 169,000 construction industry jobs gained since September 2012.

For February 2013, the nation’s nonresidential construction spending was up 0.7 percent from January according to the U.S. Commerce Department. This was a 2.6 percent increase from February 2012. Private sector nonresidential construction spending was up 0.4 percent in February over January and up 6.1 percent from February 2012 numbers. On the public side construction spending was up 1.1 percent for the month but fell 1.2 percent from last year.

Much of the growth in the construction industry can be attributed to the residential construction market where new home starts rose 7 percent from February 2013 to March 2013 to a seasonally adjusted annual rate of 1.036 million. This is up 46.7 percent from March 2012. The 7 percent rise in residential construction starts was largely due to a 26.9 percent increase in multi-unit housing starts.

Construction Data Company’s 1st Quarter 2013 Construction Data Index (CDI) was recently released with nearly half, 49 percent, of construction professionals polled indicating their companies are doing better now than they were six months ago. Even more impressive is the 61 percent of respondents who feel their businesses will be doing better six months from now than they currently are. The CDI is a user-based forward-looking survey of the commercial construction industry. The index is a forecast tool that predicts future outlook for general contractors, specialty contractors and building material suppliers. The complete 1st Quarter 2013 CDI can be viewed at www.constructiondatacompany.com.

For the seventh straight month the American Institute of Architectects’ Architecture Billings Index showed growth. For February, the ABI was at 54.9 which was the strongest billings growth since early 2008. For the AIA’s index, a score of 50 indicates no change from the previous survey period. All sectors of the industry showed growth with Commercial/Industrial at 53.3, Institutional at 50.7 and Residential at 60.9. The Northeast region led the way at 56.7 followed by the Midwest and West region both at 54.7 and the South region clocking in at 52.7. That makes five straight months with all regions having a score above 50. This is a good sign for what to expect later in 2013 since nonresidential construction activity typically follows the results of this indicator by 9 to 12 months.

FMI Corporation’s Nonresidential Construction Index Report for 1st Quarter 2013 continues to show growth coming in at 58.1 which matches the number it was for 1st Quarter 2012. This is the second highest it’s been since 2nd Quarter 2012 when it reached 59.8. Any score above 50 indicates expansion, while any score below 50 indicates contraction.

Since the fiscal cliff was narrowly avoided at the end of last year, the only major threat remaining to the construction industry will be the impact of sequestration. The main impact will be fewer solicitations for federal construction projects which could trickle down to the state and local levels for those agencies that receive federal funding. It’s still too early to tell what the total impact will be, firms that primarily do construction work for the federal government will be the hardest hit. Early predictions indicate that it could result in nearly $4 billion in construction spending cuts and put nearly 100,000 construction jobs at risk. Some of this could be mitigated depending on what comes about for the president’s plan to fix the nation’s infrastructure. The plan includes investing billions to repair roads and bridges as well as attracting private investors to help fund construction projects.

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