US construction outlook bleak: Survey

However, according to the 2009 Wells Fargo Construction Industry Forecast, survey respondents were slightly more optimistic about non-residential construction activity than residential construction.The survey, carried out in October and November last year via telephone interviews with executives of approximately 450 construction contracting companies and 450 equipment distributors, found that while the majority of respondents did not expect to see an increase in the amount of work available, those who did expect increases said the gains would be seen more in the non-residential sector.“We took the pulse of the industry during a period of unprecedented turmoil and that certainly influences the numbers we are seeing,” said Wells Fargo Construction general manager Ron Riecks. “There is no doubt that there are serious economic issues yet to be faced, but construction is a cyclical industry. “We’ve been down before, and we’re confident the construction industry will rebound.”Riecks said 2009 would be a difficult year but a government stimulus package with an infrastructure revitalisation component could go a long way to helping the industry recover before the end of the year.Since many more respondents see activity decreasing than increasing in 2009, the Wells Fargo Optimism Quotient (OQ) fell to 42 – down from 80 in last year’s forecast and continuing a four-year decline from its peak of 109 in 2005. Wells Fargo said the OQ was the forecast’s primary indicator of respondents’ expectations of local construction activity and was based on responses to questions about local construction activity for the coming year. In general, an OQ score of 100 or more represents high optimism for increased local construction activity. A score above 75 represents more cautious or measured optimism. Wells Fargo said this year’s lower score indicated that significantly fewer respondents think 2009 construction activity will increase. Wells Fargo said some of the key trends were: Equipment – more contractors plan to buy used equipment in 2009 than in 2008, with the average age of fleets up substantially; Rental – contractors expect to rent equipment slightly more often, rental rates are expected to hold steady, and distributors’ share of the rental market has grown slightly; Financial – construction firms are focused on staying profitable, the credit crunch has not been as prevalent among contractors and distributors, and materials and fuel costs are still a concern; Business strategy – financing programs are the top strategy for increasing sales, distributors expect the number of contractors to decline, and more companies are buying/selling equipment on the internet; and Issue and opportunity – a focus shift towards commercial construction in 2009 as an area of opportunity, lack of work overshadowing other industry problems, and more executives being concerned with financial issues than before.

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