No Signs of Downturn for Construction Industry

NEWTON, Massachusetts – Despite talk of recession sparked by weakening economic indicators, the outlook for the construction market remains strong and shows no signs of a slowdown, according to a survey of proposal activity among design and construction industry leaders.

The Quarterly Market Forecast (QMF) for the 2nd Quarter of 2019, produced by consulting and publishing firm PSMJ Resources, reports that over half (51.4 percent) of the nearly 200 surveyed architecture, engineering and construction (AEC) professionals said that proposal activity across all markets increased in the quarter. This is compared with only 12.0 percent that saw a decrease. The remaining 36.6 percent reported that proposal activity stayed about the same in the April through June survey period.

The healthy 39 percent Net Price/Minus Index (NPMI) in the 2nd quarter matched the index level from the 1st quarter. PSMJ’s NPMI measures the difference between the percentage of firms reporting an increase in proposal activity and those reporting a decrease. It has proven to be a solid predictor of market health for the AEC industry since its inception in 2003.

“In the longest economic expansion in U.S. history, it is only natural to contemplate when it will end,” says PSMJ’s Greg Hart. “Similarly, A/E/C firms have enjoyed a long stretch of prosperity that has the worriers among us anticipating when the proverbial other shoe will drop. Even though some economic indicators suggest a weakening confidence in the outlook for our industry, the QMF tells us that there is still plenty of fuel in the tank for A/E/C firms enjoying a prolonged boom market.”

PSMJ has been using the QMF as a measure of the A/E/C industry’s health every quarter for the past 16 years, assessing the results overall and across 12 major markets and 58 submarkets. The company chose proposal activity to gauge the AEC industry’s long-term outlook because it represents the earliest stage of the project lifecycle.

The QMF faltered in advance of the Great Recession, dropping 15 percentage points in the 3rd Quarter of 2006 and sinking to its lowest level in the index’s history at the time. It also presaged the recovery, with the index returning to positive territory six months before the downturn ended.

Among the major market sectors measured, Energy/Utilities recorded the highest NPMI at 62 percent, with Housing (59 percent) a close second. Healthcare (52 percent), Environmental (49 percent) and Transportation (47 percent) rounded out the “Hot Five” markets in the 2nd quarter.

Continuing Care Facilities (70 percent) and Medical Offices (51 percent) were the two highest-performing submarkets in Healthcare, while Utility Distribution (62 percent), Renewables (58 percent) and Telecom/Cable (51 percent) were standouts in Energy/Utilities. Senior Living Facilities (69 percent) and Multifamily for Rent (52 percent) drove the Housing market’s strong results. Retail Buildings for Lease (-4 percent) was the only submarket reporting a negative NPMI among the 58 assessed, but other submarkets in that category picked up the slack, including Warehouse Distribution facilities with an NPMI of 31 percent.

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