29 Oct Signs of Economic Life

Over the last 30 plus years I have observed a number of economic recoveries and have discovered patterns that repeat themselves each time.  These early economic indicators foretell the economic trends and future events.  Over the last 4 months, a clear indication has surfaced as to where the construction economy is heading.

We can all identify individual people challenges; however it is clear – people are very predictable in numbers.  Each economic recovery starts with the consumer and their desire to have something they have been doing without.  Whether it is as simple as a small household item, new car or luxury item, Americans as a whole are impatient.  As a group, when Americans want something they figure out how to justify the expense.

These desires will often be small improvements to the home such as a new driveway, a small addition, or just redecorating.  What follows next are people starting to look for a new home and then they need furniture and decorations for their home.  Small businesses no longer delay deferred maintenance on their equipment, office or retail outlet and the recovery grows.

As I travel around the southern part of the country, I find the Mall parking lots are full.  What I am also find is that small contracting firms who provide tenant finishes and home improvements have a month or more backlog of work.  The pressure for construction pricing is building.  These indicators suggest the commercial construction market is poised to start its recovery.

Our business has doubled in the last 6 months and we are discussing potential opportunities for handling the additional work load.  I believe our business is no different than other small and medium size businesses.

In past newsletters we have shared the macro trend that commercial construction follows residential home starts by 12 -18 months.  May 2011 started a continuing trend of increasing home starts and 18 months will be November 2012.

Most recoveries have been closer to the 12 month time frame; however this one has been longer for a number of reasons including the depth of the fall and the actions taken by our political leaders to bring back the economy.  However no matter who enters the White House, the United States will see a pickup in the commercial construction economy and it should be recognizable after the first of the year.