Since the pandemic began, the construction industry has been inundated with so much doom and gloom surrounding the state of the economy. Recession! Pricing volatility! Supply disruptions! Labor shortages! Even if there is a reason for tightening spending, fear causes panic and panic can cause rash decisions. It’s time to take control of how you strategize in your business and prepare for a changing economy.  

To better understand economic impact, we enlisted the help of Dr. Chris Kuehl, Managing Director at Armada Corporate Intelligence, who will share his economic wisdom and forecasting for the next few quarters. In addition, we’ll arm you with tips from STACK to strengthen your operation in unpredictable times, explain how to use technology to your advantage, and how to maintain financial wellness. 

The Purchasing Managers Index (PMI), a standard measure of economic trends, is based on the survey responses of people tasked with making purchases for their employers in the manufacturing and service sectors.  

The important thing from the perspective of the survey is that they are not manipulating or trying to influence the data. Once they respond there is a very strong database that can be used to determine how much activity is taking place in the economy. Businesses do not buy materials when they are anticipating a downturn and they tend to buy more when they sense a growth opportunity. 

The diffusion index used in reference to the PMI has become a common tool and is designed to be simple. Any reading over 50 suggests growth and numbers under 50 suggests contraction as compared to the previous month. A few months ago the readings were quite impressive (in the 60s). They have fallen since then but are still in that expansion territory at 52.8. 

 As can be seen in the chart  below, there has been a sharp decline over the last few months, but the important point is that the numbers are still lingering in positive territory (despite the fact that quarterly GDP numbers dipped into negative territory in both Q1 and Q2 of 2022). This is not exactly news to cause dancing in the streets, but it also suggests that some of the gloom and doom may be overhyped. The crucial consideration now is what happens in the next couple of months. There are hints that GDP numbers might improve and if the PMI data does a similar recovery that reduces the chances for a recession in 2023.  

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