Forecast reveals third highest optimism rating in 20 years; two-year optimism up from 2016
Construction industry executives have entered 2017 with increased
optimism for nonresidential construction activity, according to a recent
survey of industry contractors and equipment distributors released today
from Wells
Fargo Equipment Finance, a subsidiary of Wells Fargo & Company
(NYSE:WFC). The 2017 Construction
Industry Forecast revealed increased optimism driven by expectations
of industry expansion through higher infrastructure spending and
increased company profits.
The survey’s primary benchmark for measuring construction industry
contractor and equipment distributor sentiment is the Optimism
Quotient (OQ). The OQ reached its third highest reading in 20 years
with a very positive 123 for 2017, a marked increase over the 2016
reading of 108. An OQ score greater than 100 suggests strong optimism
for increased local construction activity versus the prior calendar year.
“An OQ reading at this level leads us to believe that the industry will
continue to build on the momentum generated over the last few years,”
said John Crum, senior vice president and national sales manager of the
Construction Group at Wells Fargo Equipment Finance. “Contractors have
increasingly improved their businesses and this year looks to provide
more opportunities to do that again.”
A growing number of executives believe the industry will expand in the
next two years, with 84 percent of executives expecting moderate to
significant expansion in this timeframe versus the results in last
year’s survey that indicated only 62 percent expected expansion.
Equipment sales and purchases
Regarding equipment sales, distributors are expecting to move more new
and used equipment this year with 65 percent expecting an increase in
new and 66 percent expecting an increase in used sales, compared to
contractors who plan to increase new and used equipment purchases by 39
and 25 percent, respectively.
A significant result of the survey showed that only 13 percent and 11
percent of contractors expect to decrease new and used purchases this
year, respectively. In 2013, these figures were 30 percent and 20
percent. This reading shows the strong confidence that equipment end
users have in their businesses.
Cost concerns
Contractors and distributors report similar cost concerns in 2017. The
top concern among contractors continues to be employee wages and other
benefits (24 percent), followed by taxes (21 percent) and healthcare
costs (19 percent). Contractors are also more concerned about equipment
purchase costs in 2017 than in years past with 18 percent selecting this
as their top concern, compared with just 10 percent in 2016. Top
concerns for distributors include increasing concerns over equipment
costs (31 percent) and continued concern over healthcare costs (22
percent).
Rental market remains strong
With increasing concerns about equipment acquisition costs, contractors
generally expect to support construction expansion by renting equipment
in 2017. Although most (49 percent) continue to believe rentals will
remain flat, a growing number of contractors (38 percent, up from 27
percent in 2016) believe it will increase. The largest percentage of
contractor respondents (49 percent) cited the need for flexibility as
the most important factor in renting equipment instead of buying, while
29 percent said rental equipment being readily available is also very
important.
“Rental companies, distributors, and manufacturers might notice that
their customers indicated increased rental costs as a driver of more
purchasing behavior. Even a small increase in rental rates of less than
5% could cause almost one in five contractors to consider purchasing
over renting equipment,” said Crum.
To learn more, including key opportunities for the industry, download
the complete report, here.
The 2017 Construction Industry Forecast presents the results of Wells
Fargo Equipment Finance’s 41st year surveying construction
industry executives. This year’s survey was conducted November 10 –
December 2, 2016. Drawing on the responses of construction contractors
and equipment distributors from across the U.S., the Forecast reveals
trends in the industry and gauges the sentiment of industry leaders on a
variety of business topics.
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Survey Year
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|
Optimism Quotient (OQ)
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2017
|
|
123
|
2016
|
|
108
|
2015
|
|
130
|
2014
|
|
124
|
2013
|
|
106
|
2012
|
|
114
|
2011
|
|
96
|
2010
|
|
66
|
|
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Wells Fargo Equipment Finance annual Construction Industry Forecast
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About
Wells
Fargo Equipment Finance
Wells Fargo Equipment Finance provides competitive fixed- and
floating-rate loans and leases covering a full range of commercial
equipment for businesses nationwide as well as floor planning and
inventory financing, and vendor programs in selected industries in the
United States and Canada. Wells Fargo Equipment Finance is a leading
bank affiliated equipment leasing and finance business in the United
States by asset portfolio and annual originations, with more than
335,000 customers, and 2,500 team members. Wells Fargo Equipment Finance
is the trade name of the equipment finance businesses of Wells Fargo
Bank, N.A. and its subsidiaries. Canadian business is transacted by
Wells Fargo Equipment Finance Company.
About
Wells
Fargo
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territories to support customers who conduct business in the global
economy. With approximately 269,000 team members, Wells Fargo serves one
in three households in the United States. Wells Fargo & Company was
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