ECONOMY: As private construction sees positives in 2013, those in the public sector see a struggle

New survey shows activity in markets like road and bridge construction will be flat at best

Concrete News AGC of America January 16, 2013
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Significantly more construction firms are planning to add new staff than plan to cut staff while demand for many types of private-sector construction projects should increase this year according to survey results released Jan. 15 by the Associated General Contractors of America and Computer Guidance Corp. The survey, conducted as part of Tentative Signs of a Recovery: The 2013 Construction Industry Hiring and Business Outlook, provides a generally optimistic outlook for the year even as firms worry about rising costs and declining public-sector demand for construction.


“While the outlook for the construction industry appears to be heading in the right direction for 2013, many firms are still grappling with significant economic headwinds,” said Stephen Sandherr, the association's chief executive officer. “With luck and a lot of work, the hard-hit construction industry should be larger, healthier, more technologically savvy and more profitable by the end of 2013 than it is today.”


Sandherr noted that significantly more firms are planning to add staff this year compared to the number of firms expecting to make layoffs. He said that 31% of firms plan to add staff this year, while only 9% plan to make layoffs this year. The scope of those staff additions are likely to be modest, however, with 79% of firms reporting they plan to hire 15 or fewer people in 2013 and only 13% planning to hire more than 25 new workers this year.


Among the 30 states with large enough survey sample sizes, 56% of firms in Maryland plan to hire new staff this year, more than in any other state. Only 14% of firms in South Carolina plan to add staff this year, the least amount in any state. Meanwhile, 37% of firms in Michigan plan layoffs for this year, the highest percentage of any state. No firms working in Maryland reported plans to make layoffs this year. (Click here for state-by-state survey results.)


However, contractors expect demand for many types of public construction will decline in 2013.


A significant – but smaller than last year – number of contractors report that customers’ projects have been delayed or cancelled because of tight credit conditions. Forty percent of responding firms report that tighter lending conditions have forced their customers to delay or cancel construction projects. Only 3% of firms reported having an easier time getting credit while 41% report no change in credit conditions.


Simonson noted that overall demand for new construction equipment is likely to remain modest in 2013. Sixty-four percent of firms plan to purchase new equipment this year, down from 70% last year, while 77% of firms plan to lease this year compared to 78% in 2012. Contractors are increasingly relying on leasing equipment to avoid having to pay for idle equipment during lags in construction activity, the economist noted.


Contractors also report being squeezed by rising costs for health insurance and construction materials. Seventy-five percent of firms reported paying more for health-care coverage in 2012 and 77% expect to pay even more in 2013. Meanwhile, 88% of firms reported paying more for construction materials last year while 90% expect to pay more for their supplies this year. However, contractors are increasingly optimistic about their ability to raise bid levels. Twenty-eight percent of firms expect to increase the amount they charge for construction this year, nearly double the 15% of firms that increased prices in 2012.

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