Brighter days ahead?

By |  February 13, 2012

And now for some good news.

Construction contractors and equipment distributors are optimistic local non-residential activity will improve in 2012, according to a recent survey by Wells Fargo Equipment Finance Inc., part of Wells Fargo & Co. In the company’s 2012 Construction Industry Forecast, Wells Fargo’s Construction Optimism Quotient (OQ) – the survey’s primary benchmark for measuring contractor and equipment distributor sentiment – is at 114 for 2012, marking a material increase from 96 in 2011. An OQ over 100 is considered optimistic of year-over-year improvement in local non-residential construction activity.

Highlights of the 2012 Construction Industry Forecast

• The worst is behind us. The OQ of 114 is a strong indicator that the industry expects 2012 non-residential construction activity to improve from last year. The 2012 OQ exceeds the score of 109 recorded in 2005, near the height of the construction boom. After falling to an all-time low score of 42 in 2009, the OQ climbed to 66 in 2010 and 96 in 2011.

• Overall numbers of contractors remain a concern. In spite of rising optimism over the last three years and strong optimism for 2012, industry executives remain cautious about the amount of available work to sustain the current number of non-residential construction contractors. About four in 10 respondents (41.7 percent) said they expect fewer contractors in their markets by the end of the year. Only 10.4 percent expect the number of contractors in their area to increase in 2012.

• Equipment distributors are very optimistic. When asked about their forecast for new equipment sales, 73.3 percent said they expect to sell more in 2012 than in 2011, and zero respondents said they expect a decrease in new equipment sales. Optimism among construction equipment distributors was high with nearly six in 10 distributors (58.1 percent) expecting an increase in local non-residential construction activity. Only 1.5 percent said they expect that activity to decrease in 2012.

• Contractors are optimistic, but not as much. While 18.3 percent of contractors said they expect to acquire more new equipment in 2012 than they acquired in 2011, 52.5 percent said they would acquire the same amount and 29.2 percent said they expect to buy less new equipment in the coming year. About 40 percent of contractors said they expect non-residential construction activity to increase in the coming year; 47.3 percent expect the same level; and 12.4 percent said they expect non-residential activity levels to decrease.

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