Construction industry optimism dims for 2012
For the coming year, Barometer panelists in both states reported weakening demand for labor, and a rising concern for the quality and availability of skilled labor — a trend likely to continue into 2012. While diminished business activity is expected in 2012 in both states, the trend is significantly stronger in South Carolina. In the more populous urban regions of North Carolina, contractors expect better conditions in the near future, while the smaller, less urban areas of South Carolina expect a stronger slow-down.
Interest rates remain at historically low levels in both states, while contractors in North Carolina reported slightly stronger demand for both short- and long-term financing. In contrast, South Carolina contractors are seeing relatively constant demand for credit, but reported that commercial bankers are becoming less accommodating in granting new contractor borrowing requests.
The Carolinas Associated General Contractors reports the following:
Regional Economic Highlights
Heartland NC: Just Like the Good ‘Ol Days, with One Minor Exception …
Business conditions in first quarter 2011 in the Heartland were exceptionally good, with reports of a jump in business activity, an even larger gain in planned hiring, and strong growth in short- and long-term financing activity. After experiencing several successive quarters of bad news, these results were refreshing. Unfortunately…Heartland panelists don’t expect the good times to last throughout 2011. The unexpected uptick occurred in response to several new private construction projects; therefore, contractors see the uptick as the exception to current industry conditions rather than the rule. Still, advancing activity led to a sharp increase in labor demand, which led to difficulty in locating skilled labor. Another positive note was the sharp increase in the level of DOT spending in the Heartland for the first quarter, which should lead to increased highway spending toward mid-year 2011. Although Heartland contractors have revised their expectations downwardly for growth in 2012, they aren’t as pessimistic as panelists in other regions of the Carolinas.
Eastern NC: Some Good News—Things Aren’t So Bad!
(ENC – Up 1.0%)
The Eastern NC region advanced one percent for the quarter on rising construction activity, stable equipment and materials costs, and rising contractor optimism regarding the shape of things to come. The only reported decline: a significantly reduced demand for new workers in spite of rising business optimism and strengthening business revenue. Only a modest wholesale price inflation was reported and, likewise, only a bit more pessimism concerning business activity into 2012 in the Eastern region.
Western NC: Deteriorating Expectations for 2012
(WNC – Down 7.6%)
Business conditions in the Western NC region differed substantially from those in other NC regions. While Western contractors reported only a slight drop in business activity for the early months of 2011, they also reported rapidly deteriorating business conditions, rising equipment and materials costs, falling industry spending, and much more pessimism concerning the year ahead. As a consequence, there’s a reduced demand for construction equipment and skilled labor, falling availability of both short- and long-term credit, and growing expectations that industry price inflation will continue throughout the remaining months of 2011.