Equipment Type

Construction Will Remain Soft

The annual survey of member ready-mix companies conducted in December 2006 by the Michigan Concrete Association (MCA) revealed that a majority of those surveyed expect 2007 residential construction activity in Michigan to remain soft, while stabilizing, or even improving, in the commercial and industrial sectors.

February 12, 2007

The annual survey of member ready-mix companies conducted in December 2006 by the Michigan Concrete Association (MCA) revealed that a majority of those surveyed expect 2007 residential construction activity in Michigan to remain soft, while stabilizing, or even improving, in the commercial and industrial sectors. Although more than half of the survey participants expect a continued decrease in residential construction activity in 2007, more than 70 percent of the respondents expect commercial and industrial construction activity to remain unchanged or to increase in the year ahead.

MCA surveyed over 70 member companies who mix and deliver a majority of the concrete used in various types of construction projects (residential, commercial and industrial) throughout Michigan. In addition to questions about the general outlook for construction activity in Michigan, the survey also included questions about changes in revenues for 2006 and expected revenue changes for 2007, hiring activity in 2006 and hiring plans for 2007, as well as a ranking of the challenges confronting the industry in the year ahead.

"According to our 2007 Concrete Producer Survey, the year ahead for Michigan's construction market and the ready-mix industry may show some improvement but will continue to be challenging," said Bernie Cawley, director of Marketing and Administration for MCA. "Michigan's residential construction market remained weak in 2006, reflecting a continuation of a decline that began in late 2005. Activity in the commercial and industrial sectors, however, was slightly better with more than 50 percent of respondents reporting either an increase or no change in 2006 revenues. Nevertheless, 62 percent of the participants reported reducing their workforce in 2006, with only 6 percent reporting any additions to their staff."

Commenting on the outlook for revenues in 2007, Cawley said, "This year's survey reveals a growing belief that the worst of our state's residential construction slump may now be behind us. While 53 percent of respondents still expect a decrease in residential construction activity in 2007, 47 percent (compared to 31 percent in the previous survey) now expect activity in this key sector to either remain unchanged or even increase in 2007. The expectations for the commercial and industrial sectors were slightly more optimistic, with 70 percent of respondents expecting the commercial sector to remain unchanged or increase and 72 percent expecting a similar performance in the industrial sector. Given their caution regarding future revenues, it should come as no surprise that a vast majority (94 percent) of those surveyed plan to maintain or reduce current staffing levels, with only 6 percent expecting to add staff in 2007. The overriding concern today among respondents is a slow-down in overall 2007 construction activity in Michigan followed closely by continued increases in raw material and fuel prices."

MCA 2007 Concrete Producer Survey

What changes do you expect in Michigan construction activity in the year ahead as compared to the past year for each of these categories?

2007 2006
Residential
Increase 12% 0%
Decrease 53% 69%
Stay the same 35% 31%
Commercial
Increase 20% 48%
Decrease 30% 24%
Stay the same 50% 28%
Industrial
Increase 16% 28%
Decrease 28% 20%
Stay the same 56% 52%


What percentage of your revenues for the last 12 months has been generated by the following types of work?

2006 2005
Residential 50% 51%
Commercial 27% 22%
Industrial 20% 17%
Other 3% 10%


By what percent have your revenues changed (either + or -) over the past 12 months for each applicable category?

Residential

  • 20 percent of respondents had an average increase of 7 percent in 2005 and 73 percent had an average decrease of 12 percent.
  • 7 percent had no change in 2005.
  • 9 percent of respondents had an average increase of 14 percent in 2006 and 91 percent had an average decrease of 26 percent.

Commercial

  • 43 percent of respondents had an average increase of 9 percent in 2005 and 40 percent had an average decrease of 11 percent.
  • 17 percent of respondents had no change in 2005.
  • 31 percent of respondents had an average increase of 13 percent in 2006 and 50 percent had an average decrease of 14 percent.
  • 19 percent of respondents had no change in 2006.

Industrial

  • 23 percent of respondents had an average increase of 7 percent in 2005 and 20 percent had an average decrease of 5 percent in 2005.
  • 57 percent of respondents had no change in 2005.
  • 42 percent of respondents had an average increase of 16 percent in 2006 and 35 percent had an average decrease of 9 percent.
  • 23 percent of respondents had no change in 2006.

Other

  • 34 percent had an average increase of 7 percent in 2006 and 33 percent had an average decrease of 8 percent.
  • 33 percent had no change in 2006.

By what percent do you expect your revenues to change (either + or -) over the next 12 months for each applicable area?

Residential

  • 29 percent of respondents expect an average increase of 23 percent and 52 percent of respondents expect an average decrease of 11 percent.
  • 19 percent of respondents expect no change.

Commercial

  • 45 percent of respondents expect an average increase of 15 percent and 23 percent of respondents expect an average decrease of 8 percent.
  • 32 percent expect no change.

Industrial

  • 44 percent of respondents expect an average increase of 10 percent and 26 percent expect an average decrease of 12 percent.
  • 30 percent expect no change.

Other

  • 33 percent of respondents expect an average increase of 9 percent and 42 percent expect an average decrease of 10 percent.
  • 25 percent expect no change.

How has your employee headcount changed in the past year?

2006 2005
Added staff 6% 15%
Reduced staff 62% 33%
Unchanged 32% 52%


For the year ahead, how do you plan to adjust your employee headcount?

2007 2006
Add staff 6% 12%
Reduce staff 18% 21%
Maintain current staffing level 76% 67%


Which of the following do you regard as the most significant challenge to your business in the year ahead? Please rank them from 1 (the most significant) to 8 (the least significant).

Respondents ranked the 2007 challenges to the ready-mix industry as follows, from most to least important:

2007 2006
1 1 Slow-down in overall construction
2 2 Increases in raw material costs
3 3 Increases in fuel costs
4 5 Increases in equipment costs
5 8 Environmental regulations
6 7 Continued industry consolidation
7 6 Finding qualified employees
8 4 Other (price discounting and health insurance costs)


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