What makes the latest survey of specialist contractors by the trade body NSCC of particular concern is that, for the first time in two years, it hints heavily at recession.
It’s in the nature of surveys such as this to bounce about a bit, so it’s unwise to read too much into relatively small movements in its indicators, even if the readings are taken quarterly.
And it should be noted that changes in sentiment about wider issues than construction can influence results in surveys such as this ( NSCC State of Trade Survey ) quite a bit.
Further, this survey measures a mixed bag of firms operating at different phases of the construction process. So this tends to muddy the picture and makes interpretation even more troublesome.
But, for all that, we have now seen the balance of firms reporting on the orders they have won in negative territory for three quarters on the trot. And the number of firms saying they are winning less in orders rose markedly in the final quarter of 2011.
The upside if you can call it that is that, if the industry is dipping into recession as this survey strongly suggests, the chances are that it’s not likely to be as dramatic a plunge as we saw in 2008.
The data this survey produced then was quite dramatic. The balance between firms reporting more and reporting less work dropped from +2 to -34 between Q1 and Q2 of 2008. So clearly the sector is sensitive to change and this survey does appear to pick it up.
The decline from +2 to -3 to -6 to -16 in the balance of firms reporting growth or decline in orders from the first quarter of 2011 to the final quarter suggests a sluggish decline, but nonetheless a worrying one.
Equally worrying is that confidence appears to have waned in the final half of last year, with the balance of firms both expecting a rise in inquiries and looking to expand falling negative in 2011 Q3 and 2011 Q4.
There are also signs that firms are working at lower capacity levels, with a sharp rise (albeit from a low base) in the firms working at below 50% capacity.
There is also one other uncomfortable factor to be remembered when looking at this survey – it does not correct for survivor bias.
The industry has lost many of its specialist contractors as it has struggled through this recession. This will have buoyed the order books and capacity levels of those that remain. So it is very possible that this data in fact flatters the true state of affairs in the specialist contracting world.
There are those that talk of an improvement in sentiment in the early part of this year. It will be interesting to see if this is picked up in the NSCC survey in three months from now.