2012 Construction Outlook ? Let's Build Together

By: Laura B. Culp, CPA, MT, CCIFP, Construction and Real Estate Practice Leader

In January, the Associated General Contractors of America (AGC) released their ?2012 Construction Industry Hiring and Business Outlook,? the analysis of their end of 2011 survey results.

AGC members were surveyed on their hiring, purchasing and business plans and their answers were analyzed to answer the question of whether the construction industry will truly begin to recover in 2012.

The survey results were mixed, but overall the respondents indicated that the industry will improve in 2012.

Recovery Slow but Steady

According to Ken Simonson, the AGC?s chief economist, ?There are definitely some conflicting trends when it comes to contractors? expectations for 2012. The construction industry will improve this year, but we are going to have to wait until at least 2013 before contractors experience the kind of recovery this industry needs.?

Nationally, 32% of survey respondents indicated that they are planning to add employees in 2012 vs. 9% are expecting layoffs. Of these, the Ohio survey participants indicated that 41% were planning to add employees vs. 9% expecting layoffs.

This optimism was mirrored in AGC?s recent announcement that the construction sector gained 21,000 jobs in January, raising industry employment to a two-year high.? However, as noted by Simonson, the unemployment rate for construction is still twice as high as overall unemployment, and construction employment is at 1996 levels.? So it will take a couple more months to see if this employment growth is sustained.

Expectations for Private, Public and Stimulus Projects

According to the survey, contractors do expect the volume of private projects to grow or remain stable in every market segment, particularly power, hospital and higher education markets.

However, public sector markets are expected to continue to decrease, with only 17% of the respondents expecting these markets to increase and 44% expecting decreases.

Additionally, the stimulus-funded work is continuing to decrease and 75% of contractors who worked on stimulus funded projects do not expect to perform anymore stimulus funded work.

Credit Market, Bid Levels and Material Pricing Remain Barriers

Tight credit conditions also continue to impact the construction industry.? Almost half of the respondents (49%) stated that the tight credit market has forced customers to delay or cancel projects.? In Ohio, 59% of the survey respondents said that the tight credit market caused customer projects to be delayed or canceled.? Interestingly though, only 14% nationally and 9% for Ohio reported that their companies were having difficulty obtaining credit.

Issues continuing to face contractors are the stagnant bid levels coupled with rising material prices.? Nationally, 86% (Ohio 82%) of the companies expect material prices to rise in 2012, while 80% (Ohio 73%) expect profits on bids to be the same or smaller than 2011.

Proactive Actions to Sustain Your Business

So what does this mean to you?? With the slowly improving construction outlook, continued tight margins and increasing material prices, contractors need to continue to monitor costs, manage their cash flow and improve efficiency.? Business development should continue to be a focus point, maintaining existing relationships and building new relationships.

Our third annual Construction Forum is coming up on March 15 and will feature Stephen Boughton from FMI Corporation who will be speaking on ?Driving Best Practices in Business Development.?

We hope you will join us to learn about instilling a company-wide business development culture to drive new business opportunities and position your company for growth.? For more information, please visit our link, ?Construction Forum.?

Source: http://bcgcompany.com/blog/build/2012/02/09/2012-construction-outlook/

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