Gilbane predicts construction downturn in 2013

THE ARCHITECTURAL BILLINGS INDEX in Gilbane Building Company's annual report predicts increased spending through the end of 2012 before slowing down in 2013.
Posted 10/4/12

PROVIDENCE – In its annual construction-industry economic report, Gilbane Building Co. predicted a downturn in construction spending in early 2013.

The report, Construction Economics - Market Conditions in Construction, is based on an array of economic data, construction starts and material cost trends.

The Architectural Billings Index, which predicts activity nine to 12 months in the future, indicates increased spending through the end of 2012 before slowing down in 2013.

“Jobs continue to be the difficulty in this construction recovery. They are at a near standstill, while spending continues a slow climb,” Ed Zarenski, report author and a 40-year veteran of the construction industry, said in prepared remarks.

“A nugget of good news, though, is that climb may mean productivity is increasing,” said Zarenski, adding that construction spending is only up 2.5 percent since the beginning of 2012, but is 6 percent higher than this time during 2011. “Supported by positive growth trends, contractors may be able to recover a bit of lost margins,” he said.

According to the Gilbane report, the construction industry has seen slow but continuous growth in the contractor’s margins starting with a slow return to the black in 2011.

Both material price increases and labor cost growth will contribute to escalation in the future, said the report, adding: “Contractors’ building costs ‘charged’ in 2012 are above labor and material cost increases, signaling a continued movement towards recovery of more normalized margins.”

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