On Record

|  February 03, 2011 |

It’s over but it’s not

By Marcia Gruver Doyle

While the headline on a recent press release touted that “more construction firms plan to hire” in 2011, I found more meat eight paragraphs down. In a December survey of roughly 1,200 contractors, the Associated General Contractors of America found that 28 percent of respondents say they plan to purchase new construction equipment this year, down from the 34 percent who said last year they planned to purchase new equipment.

But there’s some good news among the bad: These firms say they plan to spend an average of nearly $900,000 for new equipment, up from an average of $671,000 last year.

This good news/bad news dichotomy mirrors what we’re hearing from our own internal surveys. Our small group of surveyed contractors continues to report modest improvement in their general business conditions, but the vast majority says they expect no change in their fleet size. “We have not put as many hours on some pieces of equipment, so those machines are being replaced in seven years instead of five,” said one respondent.

It’s over but it’s not.

As editors we hear a lot of prognostications about what the industry can expect, but we always pay attention to the one Ed Sullivan presents each year at World of Concrete. Sullivan, who’s the Portland Cement Association’s chief economist, draws you in with his self-assured manner and straight talk.

There are two possible upsides that could push things along: job creation and a new highway bill, which Sullivan sees coming in … you guessed it … 2013.

“This recession is a construction recession, and all the headwinds are still in place, including high unemployment and state and local deficits,” said Sullivan. “We see tepid growth for this year and 2012.” And don’t be fooled by year-to-year spectacular gains, which will be exaggerated by the spectacular depths of the 2009-2010 market, Sullivan cautioned.

It won’t be residential – still suffering from excess inventory and foreclosures – that leads the way. “Slow job growth, tight lending standards and a high level of foreclosures will prevent significant increases in housing starts until late 2012,” Sullivan said. “The pent-up demand for housing will start to appear in 2013.”

There are two possible upsides that could push things along: job creation and a new highway bill, which Sullivan sees coming in … you guessed it … 2013.

“There’s no pothole fairy,” Sullivan said. “For every year you decide not to repair a pothole, pent-up demand is generated.”

If Sullivan is right, we’ve got two more years of working on the equivalent of a 1 percent slope. I prefer to think of it as two years to get ready. EW

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