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2014 Annual Report and Forecast

This past year may have been a turning point for markets covered by the publications in the Scranton Gillette/SGC Horizon stable.

December 18, 2013

Forward Momentum Carries Hope for 2014

This past year may have been a turning point for markets covered by the publications in the Scranton Gillette/SGC Horizon stable. Business reports were up across the board compared to 2012.

What each worries about, however, are external forces that continue to dampen the ability to accurately project construction activity for this year: lack of leadership from the federal government on infrastructure, continued financial distress at state and local levels, and anemic economy and job markets.

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Construction Equipment Fleets

Transportation

Water Infrastructure

Home Building

Remodeling

Nonresidential

All markets project solid expectations for business growth, and each says 2014 will be better than 2013. Remodeling continues to be the strongest of the groups reporting, but the others are close behind. Even new-home construction extends high hopes for 2014 business.

The forecast extends across all regions, with New England providing a slightly more upbeat outlook. Construction firms in that region—comprised of Maine, New Hampshire, Vermont, Massachetts, Rhode Island, and Connecticut—expect a “good” year after leading the nation in 2013 with the only “average” year. All other regions expect 2014 to be “average.”

Every market segment surveyed expects good contract volume growth this year. Remodeling, again, has the most positive outlook. Seven out of 10 expect contract volume to be greater this year compared to last, and when the 9 percent who expect volume decreases are subtracted, the net is 62.6 percent. The next closest markets are nonresidential with a net of 45 percent, and homebuilding at 47.7 percent. To round out the growth numbers, water was 31.6 percent net and transportation 17.4 percent.

As an aggregate, markets reported a net of 34.7 percent (48.9 percent expecting revenue growth minus 14.2 percent expecting a decline). The Great Lakes region has the strongest expectations with a net of 39.5 percent.

Competition for construction projects remains constant, with 17.9 percent of respondents citing “intensely competitive” markets. Last year, that number was 16.5 percent. An additional 51.5 percent say they are operating in “very” competive situations, up from 47.7 percent last year.

Respondents expect bid prices to continue inching up. A net of 57.8 percent (63 percent expecting higher prices minus 5.2 percent expecting lower prices) compares to last year’s net of 49.6 percent (56.5 percent minus 6.9 percent). The most optimistic market, and the one most needing to regain profitability, is home building: 72.2 percent expect bid-price increases minus 2.4 percent expecting delines leaves a net of 69.8 percent.

Material-price expectations are even more pronounced, with a net of 80 percent expecting higher prices in 2014 (82.9 percent minus 0.9 percent).

Firm health improved markedly last year. In 2012, about half of respondents said their construction firms were in “very good” or “good” overall health. In 2013, that percentage grew to 60 percent. Transportation has the largest percentage of healthy firms, with 62 percent reporting “very good” or “good.”

Methodology: Each magazine sent email invititations to its subscriber base, inviting participation on an online survey. More than 2,000 responded. Respondents by market include nonresidential, 425; fleet managers, 272; home builders, 388; remodelers, 181; transportation, 405; water infrastructure, 409.

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