Supply House Times

NFIB: 'Construction Remains Soft'

August 12, 2008

“The construction industry remains soft and a drag on the economy,” said National Federation of Independent Business Chief Economist William Dunkelberg, referring to information gathered for the group’s July Index of Small Business Optimism. Over the past few months, only 7 percent of construction firms increased inventories, while 24 percent reported reductions. Only 4 percent plan increases in the third quarter compared to 19 percent that plan inventory reductions.

Still, more owners in the construction industry plan to expand employment (19 percent) than plan reductions (12 percent). Thirteen percent reported cutting average selling prices, but 48 percent reported price hikes in spite of overall weakness in construction activities. Inflation (on the input or cost side) was the No. 1 problem facing construction firm owners. Even with the price hikes, 45 percent of the owners reported lower earnings, quarter over quarter, compared to 18 percent reporting gains.

The NFIB index fell one point to 88.2 in July, establishing one of the longest strings of recession-level readings in the history of the survey. Half of the decline was due to weaker capital spending plans - the lowest reading since 1975. Lower earnings, fewer job openings and lower inventory satisfaction also posted substantial declines, but those were mostly offset by gains in expected real sales, business conditions and the percent of owners saying this is a good time to expand.