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Sunday, 05 January 2014 20:55

Do construction numbers tell full story?

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Despite all the changes to the design, development and construction sector, the fundamentals of the industry have not changed.

So say industry insiders who tell MiBiz that they still live by the mottos “cash is king” and “don’t carry debt.”

But the days of waiting for new business to walk in through the door are over, making business development one of the most important functions within the sector, they said. Companies have to get projects in the pipeline to keep the business moving ahead.

Studies from a handful of industry organizations point to those pipelines continuing to fill up.

The Associated Builders and Contractors’ National Construction Backlog Indicator average for the third quarter of 2013 was 6.15 months in the Midwest, which was down 0.82 months from the same period in 2012. But the economy’s gradual recovery and the “unchanged” projections for nonresidential construction spending are “a good sign the downturn in the industry has stopped,” ABC stated in releasing the index.

As the ABC’s Chief Economist Anirban Basu noted in the report, “Even slow growth leads to construction opportunities.”

Meanwhile, the American Institute of Architects' Architectural Billings Index for the Midwest, which measures “work on the boards” and foretells future construction activity, remained relatively unchanged over the second half of the year, posting a 51.6 for November, the most recent figures available. Any number above 50 indicates growth.

Residential construction remained the strongest sector nationwide, well ahead of commercial/industrial and institutional, according to the AIA.

While statewide construction employment in November was up 2 percent or 2,500 positions over the same period in 2012, companies actually shed 1,100 jobs from October, according to U.S. Census figures compiled by the Association of General Contractors. Total construction employment in Michigan was 128,100 as of November.

At the same time, some construction materials prices continue to rise. Softwood lumber, gypsum products and prefabricated wood structural members all went up more than 11 percent over the last 12 months, according to the Bureau of Labor Statistics. Softwood lumber prices on their own went up 16.2 percent.

While the backlogs of many builders are holding at strong levels, local design and build firms are shy to mention that many developments in the pipeline were projects that had been put on hold in previous years, when there was much more economic uncertainty.

That begs the question: As both the economy and confidence continue to improve, do the numbers tell the whole story of the industry’s situation?

We’ll have to watch over the next year to find out.

Read 2023 times Last modified on Thursday, 02 January 2014 13:15

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