FMI releases Q2-2013 construction outlook
Projections by FMI are down due to a decline in public construction and expectations of more cuts due to the sequester, though there is a projected rebound for 2014.
FMI released its Q2-2013 Construction Outlook and reduced annual Construction-Put-In-Place predictions to $913 billion, a 7% growth from 2012, due to shifting markets. This is down nearly $6 billion from the $918,897 million, 8% growth estimated in the Q1’s Outlook. However, FMI does expect growth to return to 8% growth in 2014 with annual CPIP reaching $989 billion.
The major markets adjusted downward with lower expected growth are:
Commercial Construction (-0.8%) — The current forecast calls for about a 1% drop in commercial construction from the Q1 forecast. However, this still represents a modest increase of 6%, to $49.8 billion for 2013. One of the contributing factors is that sales for retail and food service businesses is slower than anticipated.
Health care (-3.15%) — Contributing factors for the decrease include hospital beds per 1,000 people trending downward and shorter patient stays.
Amusement and Recreation (-2.0%) — Given the belt-tightening attitude across the country right now, it will likely be much more difficult to get funding from taxes and municipalities to build new stadiums in the near future.
Sewage and Water Disposal (-3.8%) — Construction for sewage and waste disposal was off 2% in 2012. FMI forecasts another 2% drop in 2013. The ability to fund necessary water infrastructure improvements is central to the decline as many municipal water systems still depend on the tax base for funding.
Water Supply (-3.2%) — Construction for water supply projects will drop 1% in 2013 after dropping 7% in 2012. On the bright side, in March the Senate Environmental and Public Works Committee unanimously approved a Water Resources Development Act, including a measure to create the Water Infrastructure Finance and Innovation Act. WIFIA would provide $50 million per year from 2014 to 2018 to help fund large-scale water infrastructure projects.
While there is no singular reason for the drop in these markets—each is evaluated on its own criteria—there are a few economic concerns that touch all of them.
- The decline in public construction
- Expectations of more cuts as the sequestration continues
- Tight lending criteria
- Consumers cautious about increasing their debt load.
This economic climate will keep the heat on A/E/C industry competition, especially if companies that make their livelihood in government construction start looking for work in the already competitive private sectors.
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Annual Salary Survey
In a year when manufacturing continued to lead the economic rebound, it makes sense that plant manager bonuses rebounded. Plant Engineering’s annual Salary Survey shows both wages and bonuses rose in 2012 after a retreat the year before.
Average salary across all job titles for plant floor management rose 3.5% to $95,446, and bonus compensation jumped to $15,162, a 4.2% increase from the 2010 level and double the 2011 total, which showed a sharp drop in bonus.