(through August 2011), including sewage and waste disposal (-13 percent), water supply (-12 percent), education (-2.8 percent) and public safety (-5.8 percent). State and local capital budgets will most likely be constrained for the next fiscal year, which will serve as a substantial hindrance to progress within the nation’s nonresidential construction segment.
Materials prices will be the wildcard. For much of 2011, these prices increased despite stagnant construction volumes. According to the U.S. Census Bureau, iron and steel prices increased 14 percent on a year-over-year basis through September 2011. Crude energy prices went up 20 percent from September 2010. These increases resulted from commodity price speculation, and ongoing price volatility can be presumed next year. Construction materials prices often rise perversely in the wake of negative economic news as investors seek to reduce exposure to equities and other asset classes in favor of hard assets like commodities.
Despite this and other considerations, construction financial executives are reasonably confident about business and financial conditions for the upcoming year. According to CFMA’s third quarter Construction Financial Executives Confidence Index (CONFINDEX), 51 percent of survey respondents expect an improvement in construction industry business conditions in 2012, while 33 percent expect conditions to be roughly the same. Only 16 percent expect conditions to deteriorate. Thirty-seven percent of CFMA survey respondents expect their sales volume to increase next year, while 45 percent expect revenues to remain stable.
