For the first time in five months, two of which brought its highest marks ever, FMI’s Nonresidential Construction Index (NRCI) fell 2.9 points in the fourth quarter to 57.4.
The good news is that despite the drop from last quarter, any mark above 50 on the index indicates growth and this quarter is still 1.9 points above the same quarter last year.
As to why the drop occurred, FMI, a management consulting and investment banking provider for the engineering and construction industry, pointed out two main concerns in its report: political infighting and productivity.
FMI postulates that the drop in the index, which surveys construction industry executives across the country, reflects “owners continuing to act with an abundance of caution along with the banks that help finance their projects” due to political uncertainty.
“Government doesn’t work like a business, but it should work more like a business,” the FMI NRCI report reads. “Those observations are at the core of what we learned when we asked panelists about the government shutdown and the budget ceiling crisis this quarter.”
And while FMI contends the federal government must become more productive, it’s urging construction firms to do the same thing. The productivity score on this quarter’s index fell to a 48.6—the lowest point for productivity since the index began in the second quarter of 2008. At that time, the overall index was below 50 as well.
The report says it is no surprise to see productivity drop during recovery from the recession. Many firms kept only their best employees and are doing more with less people. However, as the report states, “That effect can only last so long. When business improves, those good people become overworked and burned out.”
The report also points out that the skilled labor shortage is compounding the productivity problem. “As more and more companies are noting, finding well-trained people to bolster their ranks as business improves has become difficult.”
You can download a full copy of the FMI NRCI report by clicking here.