A Vastly Different Landscape – and How to Navigate It

Times have certainly changed since FMI distributed their First Quarter 2020 outlook, and the Second Quarter outlook shines the light on a vastly different landscape.  Items of disruption that have emerged include:

  • COVID-19
  • Volatility in financial and equity markets
  • Federal Reserve policies
  • Oil prices
  • Political uncertainty
  • Social unrest

FMI forecasts that due to the above factors, the current recession will last all of 2020 and possibly into 2021.  Below are some key items to note from their Second Quarter report.

The Outlook

Engineering and construction spending are forecasted to be down 9%, compared to 0% growth in 2019.  This decline includes all sectors and segments of the engineering and construction industry, with the hardest-hit segments being religious, amusement and recreation, multi-family residential, and lodging.

FMI’s third quarter non-residential construction index is at 36.9 – a  31% decline from the same metric in the second quarter and the largest decline in the history of the index. It’s important to note that any score under 50 indicates significant projected losses.

In the report, FMI goes into great detail on the construction put in place between residential and non-residential, including the breakdown of segments and sectors under each broader category.

Lessons Learned

There are three key lessons from past recessions that can help you navigate the challenging road the FMI Second Quarter forecast indicates.

  1. The construction industry lags the overall economy by 12 to 18 months – which means the disruption’s full impact will likely not be felt until 2021. Understanding the likely impact on your business and surveying the industry landscape to identify possible opportunities to pivot may help you weather the recession more effectively.
  2. Develop contingency plans. Forecast multiple scenarios for the impact on your business, and develop scenarios and action plans to account for them – including worst-case scenarios. Ensure you’re utilizing every resource to its maximum potential. If you secured a PPP loan (and recent Barnes Dennig research indicates many in the construction industry did), ensure you’re utilizing the funds as effectively as possible and building a foundation that maximizes PPP loan forgiveness. (The Barnes Dennig COVID-19 Advisory Team can help).
  3. Bull markets and bear markets co-exist. In our diverse economy, there will always be opportunities for growth. Focus on areas that are thriving and look for ways to adapt to meet growing needs.

See the Full Report

You can deep-dive into FMI’s full report on their website (PDF).

Find Out More

Whether you’re considering options for pivoting your business, developing contingency plans, or working to maximize PPP loan forgiveness opportunities, the Barnes Dennig team can help. Our newly-released construction industry compensation benchmark report is an invaluable tool in creating contingency plans and maximizing your options. Request your copy today, or contact us to learn more. We’re here to help.