AGC survey: fewer contractors plan to buy new equipment in 2011

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Only 28 percent of contractor respondents to a mid-December survey conducted by the Associated General Contractors of America say they plan to purchase new construction equipment in 2011, down from the 34 percent that reported purchasing equipment in a similar survey conducted last year. There is good news, however:  Firms report plans to spend nearly $900,000 on average for new equipment, up from an average totaling of $671,000 last year.

In other results to the Construction Industry Hiring and Business Outlook, co-sponsored with AGC by Navigant, 27 percent of construction firms report they plan to add staff in 2011 while only 20 percent report plan layoffs. Even more positive, expanding firms plan to hire an average of 23 employees, while contracting firms plan to lay off an average of 16 employees.

“This won’t be an easy year for most firms, but it will be better than last year,” said Stephen E. Sandherr, the association’s chief executive officer. “If current trends continue, this industry will be in a much better position 12 months from now than it is today.”

Despite the improving employment outlook, more contractors expect the construction market to shrink in 2011 than expect it to grow. Contractors are most pessimistic about the private office market, where 56 percent expect activity to decline, followed by the retail, warehouse and lodging market, where 52 percent expect less activity. Contractors are most optimistic about the hospital & higher education market, where 32 percent expect growth and the power market, where 29 percent expect growth. However, even for those markets, 36 percent of contractors expect the hospital and higher education market to shrink and 32 percent expect the power market to contract.

Contractors’ low expectations may be driven by the fact most firms expect stimulus-funded construction activity will decline this year. Clear majorities of firms (ranging from 56 percent to 66 percent) expect stimulus spending in every market segment to decline in 2011. Meanwhile, only 30 percent of firms report they plan to perform stimulus-funded work this year, down from the 45 percent that reported performing stimulus-funded work in 2009 or 2010.

Bid levels will remain very competitive this year. According to the survey results, 29 percent of firms report they plan to lower bid levels in 2011. That follows a year when 74 percent of firms reported lowering bid levels, including seven percent who reported lowering bid levels to the point they lost money performing the work. Adding pressure to firms’ bottom lines, 71 percent of firms report their health care costs are expected to increase in the wake of the new legislation enacted last year.