The NRCI dropped 3.3 points this quarter to 62.5, thus breaking the short run of solid advance in the previous two quarters. At first glance, one would say this is not good news. Although FMI prefers to see a constant rise in the Index, it is noted that a score of 62.5 is 2.2 points better than the one in Q3 2013. The NRCI is also still solidly in the growth range between 50 and 100. Although most components of the NRCI dropped this quarter, backlogs remain strong with expectations of improvement and productivity up a little. The signs of change are in the details, with the cost of materials continuing to climb and the cost of labor moving up sharply, both components which weigh negatively on the Index. In the near term, higher costs of production will not help contractors improve profitability. However, these components are also signs of a growing economy as manufacturers see higher utilization rates, and unemployment drops closer to full employment levels, thus pushing wages up.
Reprinted with permission from FMI Corporation, (919) 787-8400. For more information visit www.fminet.com or call Sarah Avallone at (919) 785-9221.