Carolinas AGC Construction Barometer indicates stronger business activity


For the first three months of 2010, the Carolinas AGC Construction Barometer advanced 1.0% on rising infrastructure spending, a small uptick in construction hiring, and increased activity typical in warmer weather.

Limiting the Barometer’s gain: contractors continue to struggle with weak market demand for new projects, and they foresee rising construction costs. In addition, ultra-low interest rates continue to offer minimal benefit to contractors unable to secure funding for both short- and long-term borrowing.

The Barometer’s quantitative indicators showed significantly stronger improvement than its qualitative measures (which capture contractor sentiment regarding business conditions). The quantitative Employment & Labor Market indicator advanced 5.9% on significantly higher hiring volume in all regions except in Heartland NC. Most Carolinas contractors remain open to a moderate hiring increase while labor is plentiful and costs are quite reasonable.

The quantitative Business & Economic Trends markers advanced 5% on reports of stronger construction activity, stable material and equipment costs, and rising highway and the arrival of federal stimulus money.

Unfortunately, contractors reported rising expectations that federal stimulus project money would affect overall business volume for only a few quarters in 2010, vanishing after the summer unless more government money is directed toward highway and public works projects. Thus demand for new skilled labor and heavy equipment is expected to fall in late summer, and business conditions for the rest of 2010 are likely to slow somewhat from the pace of early spring.

Another troubling trend: panelists reported significantly higher probabilities that construction costs will rise this summer, across all projected construction cost data categories.

Finally, interest rates continue at rock-bottom levels, but both demand and supply remain weak. Contractor borrowing remains well below historical average.

The Barometer advanced at a significantly stronger pace in South Carolina, where the impact of federal stimulus money appeared to be much stronger than in North Carolina. SC contractors reported improved highway spending and stronger public works activity, but neither trend is expected to last much further into the year. Thus, looking out toward the remainder of 2010, SC contractors reported lower hiring expectations mid-summer. SC contractors reported lower interest rates on contractor borrowing, slightly easier credit conditions, and a bit higher volume of loan approvals for the quarter.

Business conditions in North Carolina look somewhat different. Panelists reported slightly stronger private activity, a smaller uptick in highway spending fueled by federal stimulus money, and no real change in hiring plans. The upward movement in private construction in North Carolina is expected to be sustained for remaining 2010, resulting in a slight tightening in the supply of available skilled labor. Consistent with this trend, construction wages are expected to advance in the second and third quarters of 2010.

Click Here to view the complete Carolinas AGC Construction Barometer report.