2015 1st Quarter Economic Indicators

South Receives Highest Level of Construction Backlog in History

The backlog of commercial and industrial construction projects reached 10.3.

The backlog of commercial and industrial construction projects reached 10.3 months in the South, the highest reading in the history of the Construction Backlog Indicator (CBI), according to third-quarter results announced by Associated Builders and Contractors. Nationally CBI remained virtually unchanged at 8.5 for the quarter, although it has declined by 3.5% year-overyear, indicating that the nonresidential construction backlog has stabilized at a high level.

“Nonresidential construction remains one of the nation’s leading engines of economic growth,” said ABC Chief Economist Anirban Basu. “Industry spending is up 11% on a year-over-year basis, and the most recent backlog indicator strongly suggests that construction volumes will continue to recover. Unlike prior years, both the private and public sectors are now contributing to spending growth.

“While rapid economic growth continues to elude America, the economy has been strong enough to produce more than 2.6 million net new jobs over the past year,” said Basu. “Wage growth is poised to accelerate and residential markets continue to improve, with single family activity picking up recently and home prices continuing to edge higher in many communities. This implies ongoing support for commercial construction and stable tax collections or better, which ultimately translates into more public works projects.”

Regional Readings

Despite significant investment in components of the auto sector, including in industrial facilities, declines in commodity prices have dramatically reduced investment levels in states ranging from North Dakota to Ohio. Backlog in the Middle States now stands at 6.5 months, the lowest regional reading and a level not much different from the beginning of 2011.

Industry Highlights

  • For a second consecutive quarter, backlog in the heavy industrial category stood at more than 7 months. Prior to the last two quarters, backlog had never been above 7 months in the history of the CBI series.
  • For a 13th consecutive quarter, backlog in the commercial/institutional category stood at more than 8 months. Backlog in this category has not exceeded 9 months during the history of the series.
  • For a fifth consecutive quarter, infrastructure backlog stood above 9 months. It is likely that backlog will soon exceed the 10 month threshold.


Architectural Billings Index Ends Year on Positive Note

There were a few occasions where demand for design services decreased from a month-to-month basis in 2015, but the Architecture Billings Index (ABI) concluded the year in positive terrain and was so in eight of the twelve months of the year. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the December ABI score was 50.9, up from the mark of 49.3 in the previous month. This score reflects a slight increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.2, up from a reading of 58.6 the previous month.

“As has been the case for the past several years, there continues to be a mix of business conditions that architecture firms are experiencing,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Overall, however, ABI scores for 2015 averaged just below the strong showing in 2014, which points to another healthy year for construction this year.”

Key December ABI highlights:

  • Regional averages: West (53.7), South (53.3), Northeast (46.7), Midwest (46.1),
  • Sector index breakdown: multi-family residential (52.9), institutional (52.2), commercial / industrial (47.3), mixed practice (46.5)
  • Project inquiries index: 60.2
  • Design contracts index: 51.0

The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

The Environment is Too Chaotic to Predict. Remain Claim, All is Well.

Panelists have dropped their outlook for the economy in general this quarter, but they are still within a range expecting growth in the coming year. Some of the reasons for these drops can be seen in our “current issues” questions concerning uncertainty, optimism levels and shortages of skilled workers. Compared to the same questions last year for uncertainty and optimism, panelists haven’t changed their ratings much. They continue to be moderately uncertain about what will happen in the economy in the coming year or so, and, at the same time, they continue to be quite optimistic, but cautiously so. Again, looking at the detail behind the overall NRCI score, confidence levels for almost all market sectors have dropped, but remain within positive growth areas (with the exception of the long-range lodging expectation). The median backlog for all respondents is higher than it has been since the beginning of the recession when we started the NRCI, but expectations for backlog growth have gone down.

Overall Economy: Down

NRCI panelists’ outlook for the overall economy dropped sharply for Q4, down 12.3 points from last quarter to 58.3.

Overall Economy Where Panelists Do Business: Down

The NRCI component for panelists’ own business dropped less sharply than for the overall economy, from 73.3 to 64.8 this quarter, but still a sign that expectations have been lowered as we head into the new year.

Panelists’ Construction Business: Down

Panelists’ business, for the most part, is carrying good momentum as business has been improving, but the momentum is beginning to slow to drop this component by 5.8 points to 69.9, still in strong growth territory.

Nonresidential Building Construction Market Where Panelists Do Business: Down

While most panelists report their own business as holding strong, their opinion of the general nonresidential construction market is less exuberant this quarter, moving from 75.7 to 65.3.rs.

Expected Change in Backlog: Down

Backlogs for those participating in the NRCI survey have reached the highest level since we started this report. Now at a median of 12 months, panelists expect that rate to cool in 2016 as the component score dropped from 68.2 to 62.2 this quarter.

Cost of Construction Materials and Labor: Lower

The component for cost of construction materials was little changed from last quarter, improving 1.2 points to 30.6, indicating costs are still increasing. The cost of labor increased less sharply than last quarter, but it too is showing more increases. Generally, it is expected that costs will rise as business improves, thus holding down the overall NRCI index number.

Productivity: No Change

Once again this quarter, there is little improvement in productivity, now at 47.9, or remaining under the midrange of 50. Productivity appears to be the most difficult area to improve, especially when backlogs are growing and it is difficult to find experienced workers to help grow the business.


Basu, A. (2015, December 16). Construction Backlog Indicator. Retrieved February 3, 2016, from Associated Builders and Contractors, Inc.: http://www.abc.org/NewsMedia/ConstructionEconomic /ConstructionBacklogIndicator/tabid/272/entryid/4792/south-recordshighest- level-of-construction-backlog-in-history.aspx

Hon, K. (2016, January 20. Architectural Billings Index Ends Year on Positive Note. Retrieved February 3, 2016, from The American Institute of Architects: http://www.aia.org/press/releases/AIAB107965

Warner, P. (2015). 2015 NRCI 4th Quarter. FMI Corporation. Retrieved from https://www.fminet.com/resources

2015 3rd Quarter Ecomonic Indicators

Construction Activity Increases as Backlog Edges Higher


“The nation’s nonresidential construction industry is now one of America’s leading engines of growth,” said ABC Chief Economist Anirban Basu. “The broader U.S. economic recovery is now in its 74th month, but remains under-diversified, led primarily by a combination of consumer spending growth as well as residential and nonresidential construction recovery. Were the overall economy in better shape, the performance of nonresidential construction would not be as closely watched. The economic recovery remains fragile despite a solid GDP growth figure for the second quarter, and must at some point negotiate an interest-rate tightening cycle. Recent stock market volatility has served to remind all stakeholders how delicate the economic recovery continues to be.

“The national outlook continues to be positive,” said Basu. “The most consistently upbeat information regarding U.S. economic performance continues to emerge from the labor market. The nation added more than 2.9 million jobs between July 2014 and July 2015, enough to help drive down office and other commercial vacancy rates in many major markets despite ongoing construction.

“Also consider the tendency for commercial construction to follow residential construction. To the extent that remains true, the recent uptick in residential starts should translate into more commercial starts going forward. All of this should set the stage for further rebounds in CBI during the quarters to come, even in the absence of a long-term policy regarding infrastructure investment in the U.S.”

Industry Highlights

  • Backlog in the heavy industrial segment has never been higher during the length of the series, penetrating the seven-month mark for the first time. This represents an increase of more than two months in average backlog over the past two years. Average backlog was below five months during 2013’s second half.
  • Industrial backlog has continued to rise despite the strength of the U.S. dollar, which has contributed to limited export growth.
  • Commercial/institutional backlog has remained above eight months on average for twelve consecutive quarters, a reflection of America’s steady rate of employment expansion.
  • Backlog for all industry segments is higher on a year-over-year basis with exception of the commercial/institutional segment. Commercial/institution construction segments have been among the most active from a construction.
  • Spending perspective in recent years. Therefore, the small adjustment in average backlog is not particularly worrisome.


Basu, A. (2015, September 9). Construction Backlog Indicator. Retrieved October 22, 2015, from Associated Builders and Contractors, Inc.:http://www.abc.org/NewsMedia/ConstructionEconomic/ConstructionBacklogIndicator/tabid/272/entryid/4373/construction-activityincreases-as-backlog-edges-higher.aspx.

Strong Rebound for Architecture Billings Index

“Aside from uneven demand for design services in the Northeast, all regions are project sectors are in good shape,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Areas of concern are shifting to supply issues for the industry, including volatility in building materials costs, a lack of a deep enough talent pool to keep up with demand, as well as a lack of contractors to execute design work.”

Key September ABI highlights:

  • Regional averages: South (54.5), Midwest (54.2), West (51.7) Northeast (43.7)
  • Sector index breakdown: mixed practice (52.6), institutional (51.5), commercial / industrial (50.9) multi-family residential (49.5)
  • Project inquiries index: 61.0
  • Design contracts index: 53.2

Hon, K. (2015, October 21). Strong Rebound for Architecture Billing Index. Retrieved October 26, 2015, from The American Institute of Architects:http://www.aia.org/press/releases/AIAB107451

The Index Dropped only 1.3 Points to a Still Positive 63.6 this Quarter, 1.1 Points Ahead of Q3 2014

Construction companies are busy, and they are busier than they were last year at this time. However, there is some slippage in optimism about the economy and specifically the individual markets looking a year out and past the election year. The message is subtle and open to interpretation or other theories, but it appears that a number of forces are at work here. One is that many companies are struggling to take on more work with fewer well-trained employees. The recovery for construction post-recession has been gradual, but that gradual change has opened up a rift between the need for work and the need for more workers. Backlogs have increased for most companies and, for some, to the point of making it more difficult to sell more work. That is a better problem than finding no work, but still a problem.

Overall Economy:

At 70.6, NRCI panelists’ view of the overall economy is optimistic; however, it is 6.3 points less optimistic than last quarter and at the lowest point in the past year.

Overall Economy Where Panelists Do Business:

Looking at the economy for the markets in which panelists’ companies operate, a score of 73.3 this quarter indicates a strong outlook, although this component slipped 3.4 points from last quarter.

Panelists’ Construction Business:

Panelists’ view of their own business in the current economy is solidly positive at 75.7, with little change for the last three quarters.

Nonresidential Building Construction Market Where Panelists Do Business:

Although we see some slippage in most index components, a score of 75.0 for this component still registers in the optimistic range, as it has been over 70.0 for the last seven quarters.

Expected Change in Backlog:

The backlog component of the NRCI dropped 3.1 points from last quarter to 68.6. For the third quarter in a row, the mean backlog of all responses is 10 months with a high of 30 months and a low of just three months.

Cost of Construction Materials and Labor:

The cost of labor continues to be higher, but little change from last quarter at 12.5. Materials costs continue to be high, but slightly lower than last quarter. These two major components of construction costs act to hold down the overall NRCI as costs increase.

Productivity:

Improvements in productivity can help to overcome increases in labor and materials costs. However, this component dropped 3.4 points to just 47.6 this quarter. This is the lowest score for productivity we have seen since the NRCI began in 2008. As backlog climbs and skilled labor is in high demand, contractors find themselves in a position of trying to do more work with greener crews.

Warner, P. (2015). 2015 NRCI 3rd Quarter. FMI Corporation. Retrieved from http://www.fminet.com/nrci3q15.html

2015 2nd Quarter Economic Indicators

Construction Backlog Declines to 8 Months in Q1 2015

“Weather and a myriad of other factors always make the first quarter CBI difficult to interpret,” said ABC Chief Economist Anirban Basu. “A brutal winter may have postponed project-related work, including the signing of contracts. The first quarters of 2012 and 2014 also experienced CBI declines that effectively were reversed during the ensuing second quarters.

“However, there is a reason to believe seasonal forces were not the only factor in reducing CBI,” Basu said. “Sharp reductions in oil-field investment impacted a number of companies in the middle states, while firms in the West appear to have been disproportionately impacted by the West Coast port slowdown. Weather and the port slowdown represent temporary factors, implying that backlog should re-establish an upward trajectory during the months to come.

“Construction was hardly the only segment of the economy to be impacted by weather, labor disputes and lower energy prices,” said Basu. “The entire macro-economy failed to expand during the year’s initial quarter. Still, economic fundamentals remain relatively strong. Job growth continues to expand, unemployment is below 6 percent and wage gains are steadily building. With fuel prices still low, consumer spending is positioned to remain the primary driver of economic expansion. Residential construction also has picked up in recent months, with even the single-family market showing signs of life.”

Regional Highlights

  • Were it not for the West, overall CBI would have actually increased during the first quarter.
  • Backlog in the South, which is now adding more jobs than any other region of the country, is at the highest recorded level for the region in the history of the series.
  • Forward-looking construction indicators have not deteriorated in the middle states despite a general decline in commodity prices during the past year.

Industry Highlights

  • Despite a stronger U.S. dollar and weak export growth, CBI in the heavy industrial segment established a new high for the series during 2015’s initial quarter.
  • Firms involved in the infrastructure segment also continue to get busier. Despite the impact of winter weather, backlog remained essentially unchanged during the first quarter compared to the end of 2014 and is up by nearly two months during the past year (to an average of 10 months).
  • Given expected levels of consumer spending during the second quarter of 2015 and beyond and ongoing employment growth in professional services, health care, hospitality and financial services, the expectation is that
  • backlog expansion in the commercial/institutional segment will resume during the months ahead.

Adapted from: http://www.forconstructionpros.com/press_release/12079787/construction-backlog-declines-to-8-months-in-q1-2015

A Strong Jump in Firm Billings in June

“Probably due in part to catch-up after a disappointing first five months of the year, billings at architecture firms soared to their strongest growth level since before the last recession. At 55.7, the June ABI national score holds out hope for solid growth in design activity continuing into the summer months. With healthy readings for new design contracts so far this year it was only a matter of time before the growing volume of new work would result in increased billings by firms. The June reading of 52.5 for new design contracts was solid, suggesting that new project activity is continuing to flow into architecture firms.

The strong June billings score was enough to lift all of the regions of the country back into positive territory. Firms in the Northeast had reported declining billings for nine straight months, so hopefully the June upturn is the beginning of a new round of regional growth. Additionally, firms in the Midwest reported stronger growth in billings than at firms in any other region.

In spite of the overall upturn in billings in June, firm specializations along the major construction sectors were reflecting a very different experience. Residential firms reported another decline in billings; their fifth straight decline. One reason for the falloff in billings at residential firms is likely due to the mix of single-family homes being constructed. Early in the recovery, upper-end custom homes were dominating the market. More recently there has been some improvement in entry-level homes that typically have much less design involvement. Additionally, after several years of very strong growth, the multifamily market may be beginning to peak for this cycle. However, any weakness in the residential sector has been more than offset by billings growth at institutional firms. Billings growth at these firms is at its highest pace of the past decade.”

– See more at: http://www.aia.org/practicing/AIAB106904

2015 1st Quarter Economic Indicator

Year-End Construction Backlog Drop 1 Percent

“According to Associated Builders and Contractors (ABC), the Construction Backlog Indicator (CBI) for the fourth quarter of 2014 declined 0.1 months, or 1 percent. Despite the quarterover- quarter decline, backlog ended the year at 8.7 months, which is still 4.4 percent higher than one year ago.”

“Inconsistent growth in the volume of public work continues to suppress the pace of nonresidential construction; however, private construction momentum continues to build,” said ABC Chief Economist Anirban Basu. “With hotel occupancy rising, office vacancy falling and demand for data climbing exponentially, a number of key private segments are positioned for rapid growth in construction spending this year.”

“There are a number of factors that are likely to be beneficial to nonresidential contractors in 2015,” said Basu. “First, although interest rates were expected to rise after the Federal Reserve ended its third round of quantitative easing, they have actually been trending lower—due to factors such as falling interest rates abroad and a strengthening U.S. dollar—which helps contractors with construction volume and borrowing costs. Second, materials prices have continued to fall—particularly inputs related to the price of oil, iron ore and copper. This also makes it more likely that construction projects will move forward and helps boost profit margins.”

Regional Highlights

  • Average backlog in the South is back above 9 months for the first time since the first quarter of 2014.
  • Though backlog in the West fell sharply during 2014’s final quarter, average backlog remains comparable to where it was a year ago.
  • Both the Northeast and the Middle States registered levels of average backlog unseen during the history of the CBI survey.

Industry Highlights

  • Average backlog in the commercial and institutional category is virtually unchanged over the past year, suggesting the pace of recovery will remain moderate overall.
  • Infrastructure-related spending is likely to be brisk going forward primarily due to improved state and local government fiscal conditions.
  • Heavy industrial average backlog remains in the vicinity of multi-year highs, but these readings do not fully reflect the impact of a stronger U.S. dollar, which may result in a slowdown in export growth and an associated softening in industrial investment.

Adapted from: http://www.abc.org/NewsMedia/ConstructionEconomics/ConstructionBacklogIndicator/tabid/272/entryid/3509/yearend-construction-backlog-drops-1-percent.aspx

Signs of Spring in the March Billings Numbers

“After disappointing results in January and February, billings at U.S. architecture firms showed some signs in March of emerging from their winter doldrums. The national Architecture Billings Index score for the month was 51.7, up from 50.4 in February. More encouragingly, inquiries for new project activity showed a healthy gain, while the index score for new design contracts rebounded to 52.3 after reporting no gain with a 50.0 score in February.

In spite of the overall positive trend in billings activity, there continues to be significant regional diversity. Firms in the Midwest, South, and West all reported growth in billings in March, with all three regions seeing acceleration over February levels. However, firms in the Northeast reported relatively steep declines, with the string of weak numbers extending to seven straight months for firms in this region. Hopefully this downturn will turn out to be a weather-related seasonal episode, in which case we would expect to see growth resuming over the next few months.

By sector, institutional activity continues to recover at a very healthy pace. The ABI for institutional firms was 53.2 for March, and the tenth straight month of growth for this sector. For the past two months, institutional firms have been reporting the strongest growth of any building sector, which holds out promise of a healthy institutional construction market later this year. Commercial firms are also seeing improvement, as the ABI score for these firms was 53.0 for March, reflecting the strongest upturn in billings of the past 18 months. Moving in the other direction, though, is residential firms, which have reported modest billings declines for the past two months.”

– See more at: http://www.aia.org/practicing/AIAB106273

NRCI Fourth Quarter 2014 Highlights

Overall Economy:

After a solid start the first two quarters of 2014, panelists’ opinion of the overall economy has lost some exuberance. The latest reading of this component dropped 2.7 points to a still solid 72.1.

Overall Economy Where Panelists Do Business:

The softer outlook for the overall economy has trickled down to panelists’ local businesses dropping this component 3.2 points to 71.8 this quarter.

Panelists’ Construction Business:

Uncertainty in the overall economy makes it difficult to sustain a growth mode as the index component for panelists’ construction business slipped from 76.6 last quarter to 70.6.

Nonresidential Building Construction Market Where Panelists Do Business:

Still in much better shape than last year, this index component lost 3.1 points to 71.2 this quarter.

Expected Change in Backlog:

Backlogs are still growing, but at a slower rate than earlier in the year. The median backlog had reached 10 months in Q2 and Q3, but is back to nine months, the same as for all of 2013.

Cost of Construction Materials and Labor:

Although the index score for both improved slightly this quarter, the costs of labor and materials are still on the rise, thus holding down the overall NRCI Index score.

Productivity:

The component score for productivity slipped this quarter to its lowest point since the third quarter of 2010. Now at 49.0, it appears that rising labor costs are not being offset by improving productivity; thus it is likely that profitability will take a hit if this becomes a trend.

Adapted from: http://www.fminet.com/media/pdf/forecasts/NRCI_Q4_2014.pdf

These projections are based on assumptions of fact which may not occur, and are speculative in nature. These projections have not been reviewed or approved by independent accountants or legal counsel or other advisors. Such assumptions are subject to variations that may arise in the future and which may be beyond the control of the corporation. Any change or variation in any of the assumptions would change the projected financial statements and analysis. No representation or warranty, express or implied, is intended as to the reasonableness or accuracy of these projections.

2014 Year End Economic Indicator

Construction Backlog Indicator Reaches Another All-Time High

“Associated Builders and Contractors (ABC) Construction Backlog Indicator (CBI) reached a new all-time high during the 3rd quarter of 2014 at 8.8 months, eclipsing the previous all-time high of 8.5 months in the 2nd quarter of 2014. The 2014 3rd quarter backlog is 6.9 % higher than the third quarter of 2013 and the continued growth of backlog during the last six months likely indicates that 2015 will be a strong year of recovery for the nation’s nonresidential construction industry.”

“&Every region of the nation experienced expanding backlog during the 3rd quarter and so did every industry segment,” said ABC Chief Economist Anirban Basu. “Recent data regarding nonresidential construction and employment has shown only sporadic gains, which is consistent with the less optimistic backlog readings registered earlier this year. But the last two quarters tell a positive story that the average nonresidential contractor in America is positioned to get busier.

“Given the recent acceleration in job growth, the improvement in the quality of jobs being added, and a still-accommodative Federal Reserve, the U.S. macroeconomic outlook for 2015 represents the most upbeat assessment of economic prospects during the post-recession period,” said Basu. “The nation has added more than 2.6 million jobs over the past 12 months and, for the first time in six years, the nation’s unemployment rate has dipped below 6%. While there are a number of headwinds, including a still-shaky global economy and a meaningful dip in oil prices that is likely to impact both oil production and related capital spending, most leading indicators remain positive. Lending conditions appear to be easing and a booming stock market has generated both positive wealth and confidence effects.”

Regional Highlights

  • Average backlog is up by nearly two full months in the Northeast over the past year and by more than two months in the West. This is consistent with a rapid rebound in many East and West Coast communities that previously were held back by the housing and financial crisis of several years ago.
  • Average backlog is at or nearly at a record high in three regions, the Northeast, Middle States, and the West.
  • Backlog in the South has not progressed over the past year, but is positioned to expand due to the recent acceleration of economic growth in Louisiana, Georgia, Florida, Texas, and a number of other states.

Industry Highlights

  • Based on recent CBI readings, investment in the nation’s industrial sector should be significant in 2015. Once beholden to foreign energy producers, America is now on the verge of becoming the world’s leading oil producer and is already its preeminent provider of natural gas. This is contributing to a significant uptick in investment in the nation’s factories and distribution facilities.
  • Consumer spending remains strong and the professional services sector is adding more jobs than any segment of the economy. Not surprisingly, average backlog in the commercial segment remains at a lofty level.
  • Rebounding state and local government budgets may help keep backlog rising in the infrastructure segment despite ongoing gridlock at the federal level.

Adapted from: http://www.abc.org/NewsMedia/ConstructionEconomics/ConstructionBacklogIndicator/tabid/272/entryid/2963/construction-backlog-indicator-reaches-another-all-time-high.aspx

Architecture Firms Remain in Growth Mode

“Business conditions at architecture firms remained positive in October, with the national Architecture Billings Index (ABI) score of 53.7. With solid ABI scores for six straight months, a broader recovery in the construction market—particularly regarding nonresidential buildings—seems assured. Since new project inquiries remain strong, and new design contracts continue to build, architecture firms are expected to see a steady flow of new project activity over the coming months.”

“Regionally, firms in the Northeast reported surprisingly weak conditions in October. Conditions were very strong in this region over the summer, with no hint of the recent softening. However, firms in the other three regions of the country are very healthy from a revenue perspective, as firms in each of these regions reported accelerating ABI scores for the month.”

“By specialization, institutional firms continue to report unexpectedly strong growth. Having remained weak since the beginning of the last building downturn, institutional ABI scores have been above 50 for three straight months. Scores for residential firms also remain very high, although they have been easing somewhat in recent months. Commercial/industrial firms are reporting improving business conditions recently, but billings are not accelerating as much as for residential and institutional firms.”

Adapted from: http://www.aia.org/practicing/AIAB10490

NRCI Third Quarter 2014 Highlights

Overall Economy:

NRCI panelists’ view of the overall economy slipped 6.3 points this quarter compared to last quarter; however, the component index is still in growth territory at 74.8, 2.8 points higher than the third quarter 2013.

Overall Economy Where Panelists Do Business:

The economy where panelists do business slipped 6.9 points in line with the overall economy to a score of 75.0.

Panelists’ Construction Business:

Panelists’ outlook for their construction business fell back just 2.5 points to 76.6, still in positive range and six points higher than Q3 2014.

Nonresidential Building Construction Market Where Panelists Do Business:

Panelists see the markets they are working in as a little weaker than last quarter, dropping from 79.3 to 74.2.

Expected Change in Backlog:

Despite some pullback in optimism about the economy and markets, panelists are still expecting backlogs to improve, as the median backlog for the group has moved up from nine months to 10 months for the last two quarters.

Cost of Construction Materials and Labor:

The two components of the NRCI that have had the most influence on the drop in the overall score are the rising cost of materials and strong increase in the cost of labor. On one hand, these components indicate continued difficulty for improving profit margins. On the other hand, increased prices for materials and labor generally indicate business is improving to the point where material and labor can command higher prices and wages.

Productivity:

Productivity improvement can help offset higher costs, and a 1.4-point improvement in this component is a good sign. The challenge for contractors now is finding qualified employees to help maintain and improve productivity now that backlogs are increasing.

Adapted from: http://www.fminet.com/media/pdf/forecasts/NRCI_Q3_2014.pdf

These projections are based on assumptions of fact which may not occur, and are speculative in nature. These projections have not been reviewed or approved by independent accountants or legal counsel or other advisors. Such assumptions are subject to variations that may arise in the future and which may be beyond the control of the corporation. Any change or variation in any of the assumptions would change the projected financial statements and analysis.  No representation or warranty, express or implied, is intended as to the reasonableness or accuracy of these projections.