Q4 Construction Sentiment Index | Overall Construction Outlook

Navigating Economic Shifts: Insights from the Q4 Construction Sentiment Index & North American Outlook

Published on by Tyler Noel in Construction

Navigating Economic Shifts: Insights from the Q4 Construction Sentiment Index & North American Outlook

Getting a pulse of the construction industry

In the ever-evolving landscape of the construction industry, staying ahead of economic trends is crucial. The recently released Fourth Quarter Construction Industry Round Table (CIRT) Sentiment Index from FMI Corporation provides a snapshot of the feelings of players within the industry. Paired with insights from the FMI 2023 Fourth Quarter North American Engineering and Construction Outlook, we can gain a better understanding of where the industry is going and how businesses should react.

CIRT Sentiment Index movement

The CIRT Sentiment Index, a barometer of industry optimism, dipped slightly in the fourth quarter, sliding from 59.7 to 58.9. The overall US economy index decreased more sharply though, dropping from 45.5 to 36.1.

Key components of index movement

  • Declining optimism
    • Optimism regarding the U.S. economy saw a sharp decline. The CIRT sentiment index for the U.S. economy recorded a significant drop to 36.1 from 45.5, indicating a noteworthy shift in perceptions in Q4.
  • Segment-specific performance
    • The outlook for design services increased across most segments, except for heavy civil, which declined from 68.5 to 62.7.
    • Construction services saw improvements in non-manufacturing industrial and international but declined in commercial, healthcare, and public works.
  • Continued input challenges
    • Construction inputs including labor, materials, and productivity, continue to pose challenges as supplies remain low and costs remain high in most markets.

Technology investments as a solution

  • Nearly half of CIRT members currently use artificial intelligence and/or machine learning, while another 38% plan to integrate it in the next 12 to 24 months.
  • Over the next three years, more than half of respondents plan to invest in software for project management, design, modeling, and building information modeling (BIM).
  • CIRT members believe that these investments will improve performance tracking and create efficiency through better management of labor costs.

Overall construction outlook

Paired with the CIRT Sentiment Index, the FMI 2023 Fourth Quarter North American Engineering and Construction Outlook offers a broader context. The following insights were noted:

  • Economic contraction is expected to commence in late 2023 or early 2024. Resumption of student loan payments, continued supply chain issues, labor shortages, high interest rates, and global conflict were factors in updating the economic outlook and shifting the timing from previous projections.
  • Individual segment performance:
    • Total engineering and construction spending growth for the U.S. is forecasted to end 2023 up 5%, a significant drop from the 12% growth in 2022.
    • Single family residential construction will see a sharp decline. Multifamily will decline as well, but not as sharply.
    • Manufacturing construction saw a huge boost in 2023 thanks to the CHIPs and Science Act and that impact will continue into 2024.
    • Infrastructure related segments saw the some of the best performance in 2023 and have the strongest outlooks in the coming years.

Navigating the road ahead

As industry dynamics continue to shift, construction stakeholders must chart a course that balances the challenges and opportunities presented. Strategic investments in technology, an understanding of economic forecasts, and an adaptive approach will be instrumental in navigating the road ahead. The resilience of the construction industry lies in its ability to leverage insights and proactively steer through economic complexities.

Interpreting the trends

While the macroeconomic environment outside of the construction industry continues to be fluid, there are opportunities for contractors. Knowing where to position your company in the market can be crucial to success.

If you’d like to talk about how these trends may impact your construction business, or want to find a better, more efficient process or improve your bottom-line business results, contact us for a free consultation with one of our top construction industry pros. As always, we’re here to help.


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