A Test Of Patience Construction Forecast
It is a test of patience and endurance isn’t it, patience (and a “All politics is local.” Realizing politics cannot — and probably little faith) that the economy will recover and find the endur- should not — be ignored in the current political-economic ance to keep moving ahead. Lack of patience and endurance environment, we asked panelists to give their opinions of imis taking its toll on the construction industry as we hear about portant issues both global and domestic. On the global issues failures and bankruptcies in the news. When we asked pan- list, the potential impact of increasing inflation as the result of elists this quarter which global economic issues would have U.S. monetary policy and the collapse of the European Union the highest potential negative impact on their U.S. market topped the list. Other issues, like debt default in Greece or strategy, one executive remarked; “We need a recovery from Spain, were important, but much lower on the list of concerns. the recovery.” The slow national economic recovery has been Topping the list of domestic election-year issues was the need even slower for construction markets. However, signs of grow- to reduce spending on entitlement programs and to reduce ing confidence from NRCI panelists inched the index further the national debt. It is hard to ignore global issues, but this into expansion territory with a score of 59.8, the highest since election, like all politics, will be about national/local issues with its inception at the end of 2007. That is going on five years of foreign policy riding in the back seat. recovery. Will our patience and endurance wear out, or will something happen to either pump up the economy or take the Since NRCI panelists are all presidents and top executives of air out of a slow recovery, setting us back another five years? construction firms, we thought it would be interesting to see Stay tuned, it is an election year. what they might do if elected president of the United States. Tax reform, balanced budgets, cost cutting, entitlement reform More market factors tracked by the NRCI are up rather than and collaboration rather than confrontation were among the down. Even education, lodging and office construction have most mentioned action items from our panelists. In the meanimproved slightly since last quarter. Despite some signs of time, things are improving in spite of this being an election year. weakening, the healthcare component index is maintaining relatively solid performance. Manufacturing construction, on Global Economic Issues the other hand, is looking like the comeback kid with a steady Tracking global economic trends and political issues around improvement since the depth of the recession. The “other” the world and in the U.S. has never been the focal point of category, a catchall that includes water/wastewater, power and the NRCI. Rather, we generally want to provide a reading on federal projects, is expected to be weaker in the near term, domestic markets and market challenges as it affects contracrecovering next year, as hopefully, federal and municipal bud- tors’ strategy and business planning. However, given the curgets for construction improve. rent state of political and economic affairs domestically and around the world, these issues cannot and should not be igGlobal Economic Issues: Politics and Construc- nored. While we note that panelists’ responses and concerns tion were more “local,” they expressed moderate to high concern A couple of panelists commented that the presidential election that a number of issues could have a negative impact on their of 2012 was one of the biggest, potentially negative factors that markets and strategies. For instance, collapse of the European could affect their domestic market strategies. It did not seem Union (EU) ranked second on the list of concerns, behind the to be a matter of who won the election, just the fact that this threat of increasing U.S. inflation. In a recent global poll of is an election year was enough disruption. Continued uncer- Bloomberg customers, “The financial crisis in Europe is seen tainty caused by global and domestic issues was the concern as a ‘high threat’ to the global economy over the next year, acof many panelists realizing the fragility of the recovery. “Tip” cording to more than half of those polled.” Additionally, “More O’Neill, Speaker of the House 1977-1987, famously remarked, than three in five investors identify the European Union as 8
DDC JOURNAL | FALL 2012