Business in 2017 met or exceeded expectations across all vocations. Given the underperforming nature of 2016, respondents had pared back projections for the upcoming year. All regions experienced a “very good” 2017 following a “good” 2016, according to results from our Annual Report & Forecast.
Construction Sector Reports
History may look back at 2017 as the final escape from the nearly 10 years of uncertainty in construction, although infrastructure continues to be plagued with slow growth and expectations. Both water and transportation reported 2107 business as “good,” a target each projected at the end of 2016. Other markets covered by the Scranton Gillette/SGC Horizon publications reported that 2017 was “very good”: nonresidential, home building, and fleet management.
For 2018, four of the five markets expect a “very good” business year, with only water infrastructure’s “good” projection keeping it from being a clean sweep. Private construction has been able to grow with the economic upturn, but public funding problems are keeping infrastructure markets from growing at similar rates. When broken down by region, respondents expect more of the same for 2018, with all nine regions reporting “very good” as they look into the upcoming business year.
Slipping the shackles of stagnation
Expectations for growth in revenue are the highest they have been in a decade. Nearly 60 percent of respondents expect growth this year, and only 6 percent expect revenue to decline, leaving a net of 52.6 percent when the two are subtracted. Home building leads vocations, with a net of 61.0 percent, and the water infrastructure market reports a net of 46.1 percent.
Several regions report nets higher than 60 percent, led by the South Atlantic with 70 percent expecting increases in revenue, minus about 5 percent expecting decreases for a net of 65.2 percent. Great Lakes region has the lowest net for revenue expectations this year: 62 percent saying it will increase minus 6 percent saying it will decrease for a net of 56.3 percent.
As far as bid pricing goes, pressure on publically funded projects appears to be holding back transportation especially, and also some water infrastructure projects, with nets of 51.4 percent and 64.3 percent, respectively. Home building, on the other hand, has a net of 84.6 percent, with 85.6 percent anticipating bid price increases minus only 1 percent expecting decreases. Regionally, bid-price nets range from 59.5 percent in New England to 76.2 percent in Mountain states.
Putting pressure on bid pricing is the price of materials, which is projected to rise again this year. Across industries, 83.9 percent of respondents expect material prices to increase this year, minus only 1.0 percent expecting a decrease, for a net of 82.9 percent. Water infrastructure reports a net of 75.4, with none expecting decreases but nearly 25 percent expecting material prices to stay the same as last year. Nearly nine out of 10 Northern Plains respondents expect material prices to increase, with 10.9 percent expecting pricing to stay the same as last year.
Competitive pressure is “intense” or “very intense” for 66.2 percent of respondents. Nonresidential feels the most competition, with 77.0 percent reporting “intense” or “very intense” markets, and water infrastructure the least, with 15.5 percent saying their markets are “not very” or “not at all” competitive.
Overall firm health continues to improve, with 78.1 percent saying it was “very good” or “good” last year. At the end of 2015, 67.0 percent labeled health similarly. Less than 1 percent says overall firm health is “very weak.”
Annual Report & Forecast Methodology
Scranton Gillette Communications and SGC Horizon publish several magazines in the construction sector. Participants in the 2017 Annual Report & Forecast asked their subscriber bases about not only overall construction trends, but also trends specific to the sector in which they work. Each publication sent email invitations to its subscriber base, inviting participation in an online survey. About 1,100 responded. Respondents by market include fleet managers, 269; transportation, 111; water infrastructure, 234; nonresidential, 354; home builders, 104.