Carolinas AGC Barometer(TM) Shows Continued Stability
No News is Good News for Carolinas Contractors ...
CHARLOTTE, N.C., May 25 /PRNewswire/ -- The most recent Carolinas AGC Construction Barometer(TM) showed continued stability in the commercial construction industry. The index for 4th quarter 2004, unchanged at 2.93 (on a scale of 1 to 5), reflected a continuing balance of positive economic trends offsetting negative trends. Most Carolinas contractors report that they ended 2004 in better financial condition than they started the year, and year-end business conditions in the regional commercial construction industry were quite strong. During the last year factors such as shortages of basic construction materials, unexpected price spikes, and intense competition for private sector projects got a good bit of media coverage. However, positives such as favorable financing terms, a ready supply of skilled labor, and steadily improving business volume provided a counterbalance so that the aggregate Barometer number remained almost totally flat. The largest component indicator change is a 1.5% increase in the Employment & Labor Trends quantitative data. This slightly stronger contractor demand for skilled labor is significant as it follows a quarter in which most contractors reported reduced labor demand in the face of rising business activity, signaling their expectation that improved worker productivity across the existing construction labor force would accommodate increased business volume. The increased demand for skilled construction labor into 2005 is expected to have mixed results in different regions of the Carolinas, with contractors in urban areas reporting moderately greater difficulty in filling skilled positions. In the rural regions, where labor markets have been far softer in recent months and construction industry activity has accelerated at a slower pace, the increased demand for labor has not led to increased difficulty in hiring. In all areas of the Carolinas, it is significant that contractors report almost no labor cost inflation as the demand for labor has picked up. This is attributable to skilled workers migrating from distressed industries such as textiles and manufacturing readily available to enter the commercial construction industry. Fourth quarter Barometer results also show that contractors had slightly stronger expectations for rising business activity in commercial construction throughout 2005. It is noteworthy that this particular indicator has been trending upward for the several quarters, indicating that a steady, sustained rate of business expansion is well underway throughout the Carolinas. While this trend is strongest in the large urban areas, it is present in virtually all areas. The trend toward higher interest rates is also placing very little stress on contractors at present, with virtually all Barometer panelists reporting no change in borrowing conditions or the receptivity of commercial bankers to new requests for commercial credit. Higher interest rates are leading many contractors to rethink plans to acquire new heavy construction equipment, however, reversing an upward trend in the demand for heavy construction equipment reported in the third quarter. Contractors reported with greater confidence that construction industry costs will likely remain stable throughout 2005; this expectation covers labor costs, construction materials costs, and construction equipment costs. In each case, increased construction industry business activity and the associated increased demand for construction labor are expected to place very little upward pressure on construction costs as we move through the 2005 year. The only inflationary cloud on the construction industry horizon continues to be oil and gasoline prices, and for the moment energy cost inflation is not expected to ignite subsequent rounds of price increases for other construction materials. State vs. State: Divergent Hiring Plans (NC +0.8%; SC -1.7%) The Barometer score in North Carolina strengthened slightly by 0.8% for fourth quarter, while South Carolina's Barometer score fell modestly by 1.7% due to divergent labor market trends in the two states. Rising labor demand in North Carolina for fourth quarter is consistent with reports of rising construction activity, while in South Carolina the level of activity remained virtually unchanged from third quarter. This disparity in Barometer rankings for the two states is almost totally explained by statistical "noise" in the data. In the last Barometer report, South Carolina contractors reported sharply stronger labor demand based on the expectation of rising business activity. While North Carolina contractors expected a similar gain in business volume, they did not report increased hiring plans in the third quarter of 2004, instead deferring the announcement of new hiring plans until the end of fourth quarter. The lag between increased business activity and the need for additional hiring in North Carolina may be explained by contractors simply waiting out the winter months before announcing plans to hire additional workers that would not be needed until spring of 2005. With milder winter weather, South Carolina contractors commenced hiring immediately upon realizing gains in business activity. Regional Economic Highlights Heartland NC: Tidal Wave of New Construction Coming Down the Pipeline (-0.1%) On the surface it looks as if not much has happened in the Heartland NC region, with the basic Barometer score of 2.89 virtually unchanged from third quarter; a closer look, however, reveals a completely different story. While construction volume declined modestly in fourth quarter due to the normal winter slow-down in the region, there's a tidal wave of new business activity just down the road. Contractors report a big increase in anticipated business volume planned for 2005, and they're also planning to accelerate hiring plans and construction equipment purchases in coming months to accommodate this surge in business activity. For the moment, however, this anticipated growth in business volume is being offset by rising financing costs and diminished appetite for debt-financed business purchases in the region. Into 2005, even steadily rising interest rates won't be able to hold back contractor demand for new equipment and new employees with sharply stronger business conditions. Eastern & Western NC: Improving Labor Conditions Drive Barometer Scores Up (ENC +3.7%; WNC +0.7%) The big story in both regions for fourth quarter was a significant improvement in the construction industry labor market. On the quantitative side of the Barometer, contractors report increased plans for hiring new workers in both Eastern and Western NC, with the sharpest gains in employment expected down east. At the same time, contractors report that it is becoming easier to hire skilled labor due to the large numbers of workers migrating from the textile, apparel, and furniture manufacturing industries looking for work in construction. There's virtually no labor cost inflation expected in either region for 2005. While anticipated business conditions for 2005 have dimmed just a bit from earlier expectations, and rising interest rates are beginning to affect future borrowing plans, these negative business trends pale in comparison to improving labor market conditions in both regions. Upstate and Lowcountry SC: Look Similar, but Quite Different (USC - Down 1.9% to 2.99; LSC - Down 1.1% to 2.88) While both South Carolina regions report slightly diminished commercial construction business conditions, the root causes are quite different for each region. In the Upstate, contractors report a slight drop in anticipated business volume for the coming months, and a big drop in expected hiring plans in early 2005 to adjust labor demand to a slower rate of anticipated business expansion. Slower business growth in the Upstate is also expected to place less upward pressure on regional construction costs, and contractors report diminished expectations for rising regional materials costs. A completely different picture of the commercial construction industry characterizes the Lowcountry, where contractors report strengthening business conditions, an increased demand for construction labor, and rising equipment and materials costs. At the same time, Lowcountry contractors expect that it will be significantly more difficult to fill all available construction industry job openings from the available pool of skilled labor, and they expect wages in the region to rise in 2005. As the largest AGC chapter in the nation with 3,100 member firms, Carolinas AGC's mission is to build its members' businesses through workforce development, business development, and profit management. More than 75% of commercial and industrial construction (buildings, highways/bridges, utility facilities) in both North and South Carolina is performed or supported by Carolinas AGC members. For additional information or names of local panelists contact: Lori Tharp, Associate Dir., Business Development, Carolinas AGC (704) 372-1450, ext. 5227; email@example.com; www.cagc.org
SOURCE Carolinas AGC
More by this Source
Carolinas AGC Testifies Against North Carolina Lien Agent Law
Feb 07, 2013, 07:30 ET
Browse our custom packages or build your own to meet your unique communications needs.
Learn about PR Newswire services
Request more information about PR Newswire products and services or call us at (888) 776-0942.