NRCI FOURTH QUARTER 2015 – CONSTRUCTION: “THE ENVIRONMENT IS TOO CHAOTIC TO PREDICT. REMAIN CALM, ALL IS WELL.”

Our opening quote is from an executive answering this quarter’s NRCI survey: “The environment is too chaotic to predict. Remain calm, all is well.” To put the comment in context, it is a response to our question about economic uncertainty. The “environment” is the economy, not the weather or something geological. If you stick your head into the headline news for a few hours, you will understand what the writer means and why he or she felt it was necessary to add,“Remain calm, all is well.” Douglas Adams — an author known best in science fiction and scientific circles — might have said, “Don’t Panic.” (Douglas Adams, from the cover of the “Hitchhikers Guide to the Galaxy”) Don’t panic if you suddenly find yourself careening through outer space with little more than a towel in your possession or trying to pilot a successful construction business in a chaotic economy. Remain calm, all is well!

The NRCI for the fourth quarter 2015 dropped four points from last quarter to 59.5. It is hoped that the opening paragraph will make that drop, the lowest score since the fourth quarter 2013,seem less alarming. Panic sells newspapers — or what passes as newspapers online — but it otherwise never helps anything.

It is always better to take a closer look at the facts. For instance, it is true that 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.  

Dropping for two quarters doesn’t make a trend, although it should raise concerns. The construction industry has been on a good run, and most expect it to continue. However, some think the momentum is beginning to slow. Then there is the political season beginning to ramp up where we will be reminded of both good and bad news for the economy. Our own politics in the U.S. are often overshadowed by world events of atrocities and disasters to the point where it is difficult to see anything optimistic, but it’s there. Perhaps Charles Dickens said it best in his great opening to “A Tale of Two Cities.” “It was the best of times; it was the worst of times. . .” He was writing of a time of revolution when the world was bifurcated between rich and poor, slaves and slaveholders and a world of differences causing strife and war. He suggested the situation might parallel with his times (circa 1859), but there is no way he could have been predicting our times, could he? Don’t panic. Read on.

See the entire report here…..