Wells Fargo quarterly report shows cautious optimism for 2010
Although the national economy experienced a slight lift at the end of 2009, contractors and distributors don’t expect the lift to continue, according to Wells Fargo Construction’s Construction Quarterly for the first quarter 2010. The report measured the current and projected state of the construction industry based on executive optimism surveys, fiscal quarter results from the fourth quarter 2009 and first quarter 2010, values of construction starts and stock market values. The report says construction starts, employment levels and revenues are down and executive optimism is looking up cautiously.
According to the report, construction spending remains low in most areas. Construction spending fell 0.6 percent to an estimated $884.1 billion in January 2010, 9.3 percent below the estimate for January 2009. The value of new construction starts fell 1 percent to $419.3 billion in January, and the value on non-building construction starts fell 15 percent to $126.8 billion. Non-residential and heavy engineering starts rose 20.1 percent over the year, totaling $24.1 billion, which is 3 percent higher than in December 2009.
Construction lost 75,000 jobs in January 2010 and 1.9 million since December 2007, the Wells Fargo report says. While the national unemployment rate dropped to 9.7 percent in March, the construction unemployment rate dropped slightly to 24.9 percent, according to new Bureau of Labor Statistics (BLS) data.
Wells Fargo reported fourth quarter 2009 and first quarter 2010 revenues for several auction, rental and manufacturing companies. Equipment auction companies Ritchie Brothers Auctioneers and Iron Planet experienced growth in 2009 while rental companies United Rentals, RSC and Hertz experienced losses in the fourth quarter 2009. Revenues and sales for manufacturing companies in the fourth quarter 2009 showed mostly a loss, and Deere and Oshkosh reported increases in the first quarter 2010. National sales manager at Wells Fargo, John Crum, noted the industry’s equipment values have begun to stabilize, but numbers of new equipment sold will probably remain low in 2010.
While revenues remained low in the United States, U.S. construction equipment exports improved 26 percent between the third and fourth quarters of 2009. Canada remained the top buyer, but decreased import by 41 percent. Mexico, Australia, Chile and Brazil were included in the top buyers of exports, and China increased purchases of U.S. construction equipment by 15 percent.
Stock index values for Wells Fargo Construction rose to 258.65 in March 2010, up from 151.39 in March 2009. Companies with upward trends in the market include Astec Industries, Caterpillar, Cummins, CNH Global, Deere, Ingersoll-Rand, Manitowoc, Oshkosh and URS.
The Construction Quarterly cited a survey conducted by Wells Fargo in early 2010 gauging executive optimism for the industry in 2010. While the optimism quotient rose to 66 in January 2010 from 42 in January 2009, many executives believe 2010 won’t bring much improvement over 2009. More than 55 percent of the executives surveyed said non-residential activity will not improve until the second quarter of 2011 or beyond. Read a summary of the optimism report here.
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