Survey: Construction Executives See Industry Remaining Flat Through 2013
The construction industry believes that the industry’s recession will not end until mid-2013, according to a survey in the Sept. 20 issue of Engineering News-Record (ENR) magazine and on enr.com, published by McGraw-Hill Construction. According to the ENR Construction Industry Confidence Index for the third quarter of 2012, construction and design firm executives believe that the market in the near term will continue to be flat, and that Mitt Romney’s election represents the best bet for a broad construction recovery in 2013.
As part of the CICI survey, ENR conducted an election poll asking which candidate would be better for the construction industry. Of the 378 executives polled, 269, or 71.2 percent, said Romney was the better choice, 14.8 percent said Obama would be better, and 14.0 percent were undecided. The margin of error is 4.6 percent.
“The Q3-2012 CICI, which measures industry sentiment for market sectors and trends, is 50 on a scale of 100, where a value of 50 indicates a stable market, with the higher the value above 50 reflecting the wider the belief in an expanding market. This quarter’s figure indicates a belief that the construction market remains flat at a low level,” said Gary Tulacz, senior editor, ENR. “This is down from the Q1-2012 CICI rating of 58 from last April, where survey respondents believed the market was poised for recovery,” he added. The CICI index is based on 378 responses to surveys sent to more than 3,000 domestic firms on ENR’s lists of leading contractors and engineering firms.
Regarding the current market, the survey states that 32 percent of construction industry executives polled believe it is still in decline, while only 17 percent believe it is growing. “Only 25 percent of executives believe the construction market will grow within the next six months, and an equal number believe it will still be in decline. However, 51 percent believe the market will improve by the end of 2013, compared to only 8 percent of respondents who believe the market will continue to decline in the next 12 to 18 months,” said Tulacz.
Based on comments volunteered by respondents, a number of executives claimed that Obama was anti-business, interfering with overall growth in the economy. Others questioned Romney’s leadership. However, many executives focused on markets. “The public sector will see more work under Obama, while the private sector will see more work under Romney,” said one undecided executive.
Survey respondents believe the private-sector markets are the healthiest. The construction sectors perceived to be the strongest were petroleum, power, health care and multi-unit residential. Construction sectors seen as still in recession were the entertainment and cultural, commercial office, retail and K-12 education markets.
A concern among construction firms is that public sector spending will continue to be constrained by concerns over budget shortfalls and deficits. Confidence levels in such traditionally public market sectors as transportation, water and sewer have fallen over the last several quarters, and construction executives of companies working in those sectors do not see any significant recovery until 2013, after the presidential election.
The next quarterly survey results will be available in December 2012.
Builder Confidence Continues to Gain Momentum in September
Builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September to a level of 40 on the National Association of Home Builders/Wells Fargo Housing Market Index, released Sept. 18. This latest three-point gain brings the index to its highest reading since June of 2006.
“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work—which would create needed jobs—and discouraging consumers from pursuing a new-home purchase.”
“Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years,” noted NAHB Chief Economist David Crowe. “However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags.”
Derived from a monthly survey that NAHB has been conducting for the past 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
All three HMI components posted gains in September. While the component gauging current sales conditions increased four points to 42, the component gauging sales prospects in the next six months rose eight points to 51 and the component measuring traffic of prospective buyers edged up one point to 31.
Builder confidence also rose across every region of the country in September. Looking at the three-month moving average for each region, the Midwest and West each registered five-point gains, to 40 and 43, respectively, while the South posted a four-point gain to 36 and the Northeast posted a two-point gain to 30.
List of Improving Housing Markets Expands to 99 in September
The number of improving housing markets across the country rose to 99 in September, according to the National Association of Home Builders/First American Improving Markets Index, released Sept. 10. This is up from 80 metro areas that were listed as improving in August and includes representatives from 33 states as well as the District of Columbia.
The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Markets added to the list in September include such geographically diverse locations as Tucson, Ariz.; Jacksonville, Fla.; Springfield, Ill.; Greenville, N.C.; and Bend, Ore.
“The number of improving housing markets grew by 19 in September as 68 metros retained their spots, 31 new metros were added and just 12 dropped off the list,” noted Barry Rutenberg, chairman of the National Association of Home Builders and a home builder from Gainesville, Fla. “This solid growth is an encouraging sign that housing continues on a slow but steady recovery path that is gradually advancing from one local market to the next.”
“More metros across the country are experiencing a sustained uptick in house prices, employment and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase,” observed NAHB Chief Economist David Crowe. “That said, overly tight lending conditions for builders and buyers continue to slow this process considerably.”
The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three measures for at least six months following those measures’ respective troughs before being included on the improving markets list.
A complete list of all 99 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in September, is available at www.nahb.org/imi.
Global Demand for Drywall to Approach 10.7 Billion Square Meters in 2016
Worldwide sales of drywall are forecast to expand 8.6 percent per annum through 2016 to nearly 10.7 billion square meters, a massive improvement over the 2006–2011 pace. Following recent severe losses between 2008 and 2011, drywall demand is expected to rebound sharply in North America and Western Europe. The East European market will also improve. While advances in the Africa/Mideast region, Asia/Pacific region and Central and South America are projected to decelerate slightly through 2016, each of these regions is still expected to record impressive growth. These and other trends are presented in “World Drywall & Building Plaster,” a new study from The Freedonia Group, Inc., a Cleveland-based industry market research firm.
Nearly 70 percent of additional drywall demand generated between 2011 and 2016 will be attributable to China and the United States. Product sales in the United States are projected to grow more than 12 percent per year during this period. After declining sharply between 2006 and 2011, the amount of new residential floor space in the country is expected to increase at a double-digit pace. Rapid nonresidential building construction spending gains are also expected to stimulate growth in the U.S. market. In China, demand for drywall is forecast to grow nearly 12 percent per year through 2016.
Numerous industrializing countries are also projected to register robust growth between 2011 and 2016, including India, Saudi Arabia, Mexico, Thailand and Turkey. Increasing demand for urban housing will drive residential building construction spending and related drywall sales. Consumption in these countries will also grow because of advances in office and commercial construction activity. Going forward, local construction firms will increase their use of modern building materials (such as drywall) at the expense of other products (such as building plaster).
The drywall market in Western Europe is forecast to expand 3.6 percent per year, a considerable improvement over the 2006–2011 pace. Spain is expected to register the fastest growth during this period, as new residential construction activity begins to recover, even though inflation-adjusted spending in 2016 will be well below the 2006 level. Among the other major markets that are expected to perform well are Italy, France and the United Kingdom. Drywall demand in Western Europe will rise primarily because of increases in new residential construction from a depressed 2011 level.
Demand for Power and Hand Tools to Exceed $13 Billion in 2016
Demand for power and hand tools in the United States is forecast to expand 4.8 percent per year to $13.1 billion in 2016, a turnaround from declines recorded during the 2006–2011 period. Growth will benefit in large part from recovering construction activity, specifically an expected rebound in housing starts. The continued popularity of DIY and home remodeling activities among consumers will provide additional sales opportunities, and an improved U.S. manufacturing environment will also support gains. However, intense price competition in nearly every category of tools will serve to restrain advances in market value. The durability of many engine-driven, hand and pneumatic tools will also limit overall sales gains. These and other trends are presented in “Power & Hand Tools,” a new study from The Freedonia Group, Inc., a Cleveland-based industry market research firm.
Demand gains for power tools will outperform those for hand tools, as power tools—especially cordless electric—benefit from greater capacity for innovation. For instance, battery technology improvements have made cordless electric tools more powerful, which has increased their usage—especially in the pro market. Additionally, lithium-ion batteries are becoming increasingly prominent in cordless tools, as they offer a lighter weight and longer run time than the nickel-based batteries they replace. Advances in the hand tool market are ultimately limited by their inherently simple design, which allows for only modest improvements and pricing increases. In addition, many hand tools are designed to last decades, restraining opportunities for replacement sales.
The professional market comprised the majority of power and hand tool demand in 2011, which reflects the greater concentration of expensive power tools in the professional market. In addition, professionals tend to use tools on a daily basis and, as a result, must replace tools more frequently (although professionals can use some basic hand tools for more than a decade). Professionals are often willing to pay more for higher quality tools, since the initial investment will pay off over the long run through better performance and longer tool life. In contrast, consumers are more likely to purchase tools based on price, and rarely require more expensive hydraulic and pneumatic tools.
Consumer demand is tied to individual participation in DIY home maintenance and repair, various hobbies and other diverse factors. Professional demand growth will outpace consumer gains through 2016, due to a rebound in housing starts and increases in manufacturing output.
People in the News
Grabber Construction Products, Inc. has promoted Alan Dimlow to regional manager. His area of responsibility will cover from Pennsylvania north to Maine, overseeing the sales and operations at Grabber’s New England and New Jersey locations.
Also, Kraig Shoemaker, Upper Midwest regional sales and operations manager, has been promoted and his responsibilities expanded to include the entire Central Midwest Regions. In his new role Shoemaker will develop new opportunities and strategies in Missouri, Kansas, Nebraska, Iowa and the Dakotas, as well as continuing his ongoing leadership duties with the Grabber Midwest team.
Portland Cement Association, Skokie, Ill., announced management changes designed to shift leadership to Washington, D.C., in support of a renewed emphasis on national advocacy efforts in our nation’s capitol.
On Sept. 6, 2012, Greg Scott, PCA’s senior vice president of government affairs, was promoted to president. He reports to Brian McCarthy, PCA’s current president/CEO based in Skokie, who will remain with PCA until year-end as CEO.
On Jan. 1, 2013, Scott will assume the position of president/CEO of PCA. Although PCA’s president/CEO will be based in Washington, D.C., the Skokie office will continue to operate.
International Code Council Chief Executive Officer Rick Weiland announced Sept. 17 that he will be leaving the association to pursue other opportunities. Weiland has been CEO since 2006, after serving as chief operating officer from 2003 to 2006.
Dominic Sims, C.B.O., executive vice president and director of operations for ICC, will serve as acting CEO while the Code Council conducts an international search for Weiland’s successor.
The Steel Stud Manufacturers Association has appointed Rahim Zadeh, P.E., as its technical director. Zadeh brings more than 30 years experience within the steel framing industry to his new role with the SSMA.
Products in the News
Sto Corp. in Atlanta, and Pecora Corporation® in Harleysville, Pa., have announced a Companion Warranty Program.
Under this agreement Sto Corp. and Pecora Corporation will issue companion warranties for qualified Sto EIF systems and qualified Pecora sealants.
Customers may apply for a 10- to 15-year warranty from Sto Corp. with a warranty period matching that of Pecora under certain conditions.