Construction Barometer™ > Previous Quarter Results > News
Release - 2nd Quarter 2003
News Release
(Based on First Quarter 2003)
Carolinas AGC Construction Barometer™ Unchanged
Indications Of Improving Construction Business Conditions Seen
The most recent Carolinas AGC Construction Barometer™, which tracks quantitative data as well as opinion among contractors and industry allies, remains at 2.97, unchanged from the 4th quarter of 2002. However, a look inside the quarterly numbers indicates that the Carolinas construction industry may have turned the corner.
Strengthened contractor expectations for improved business conditions by mid-2003 along with a significant advance in anticipated highway and utility spending in both Carolinas drove a hefty gain in one Barometer component. The quantitative data in the Business and Economic trends moved up sharply in the 1st quarter 2003 report, posting a 13.3 % gain from 4th quarter 2002.
The general level of unemployment within the Carolinas labor market remained virtually unchanged from 4th quarter 2002 to 1st quarter 2003, stemming the tide of job losses evident in previous reports.
“It’s very likely that we’ve turned the corner on the 2001 – 02 recession in commercial construction, and we’re beginning to see better business conditions throughout the nonresidential construction industry,” says Tony Plath, UNCC associate professor of finance and developer of the Carolinas AGC Barometer. “It’s too early to call the growth trend emerging from the Barometer a genuine turning point, but it is a growth trend and it points to better business conditions in coming quarters.”
According to Plath, the Barometer points to slow, steady improvement in the construction industry with a much better outlook than it has had at almost any point in the last five or six quarters. He says job losses in other sectors of the economy, combined with contractors’ increasing difficulty in finding qualified workers, and a slight deterioration in financing availability are only minor negatives in the overall economic scheme.
State-By-State Overview
North Carolina’s Barometer rose 1.5 % to 2.96, while South Carolina’s Barometer declined to 3.00, down 3.1 % from fourth quarter 2002. North Carolina’s Business and Economic trends series of the quantitative index moved up 22.6 %, while South Carolina posted a modest 2.7% decline in this series.
Rising NC Department of Transportation spending is at least partially responsible for the strength of anticipated business improvement in North Carolina.
Heartland North Carolina holds the most positive outlook, posting a 30.1 % increase in the Business and Economic trend segment of the quantitative index. Contractors in this region anticipate greatly increased business activity in coming quarters. Recent announcements of public works projects in the region, increased DOT spending and several large private sector projects in the Charlotte area support this upbeat attitude.
Eastern and Western NC are both moderately down, 0.2 % and 3.8 % respectively. Business expectations are slightly improved in Eastern North Carolina, but this was offset by lower labor availability and expectations of labor cost increases. In Western North Carolina, financing activity fell off 4.6 %, indicating a decreased willingness to borrow for business expansion.
In Lowcountry South Carolina, the Barometer tumbled 8.4 %, pushed lower by weaker anticipated business activity, a softening in the labor market and weaker credit conditions. Upstate South Carolina’s Barometer eased down 0.7 %. Stronger demand for commercial credit and increased DOT spending in the region points toward better days ahead in the Upcountry.
As the largest AGC chapter in the US with 3,200 member firms, Carolinas AGC builds its members’ businesses through workforce development, business development, profit management, and a self-insured workers’ compensation trust. More than 75% of commercial/industrial work (buildings, highways, utility facilities) in the Carolinas is performed or supported by CAGC members.
Regional Economic Highlights
Heartland NC: Piedmont Contractors Are Happy Campers These Days...
(Up 30.1%)
The I-85 corridor represents the most upbeat region in the Carolinas for the first quarter of 2003, posting a huge 30.1% advance in the Business and Economic trends segment of the quantitative index. The source of all this Piedmont optimism is a significant gain in the volume of business activity expected by Heartland contractors this year. This trend is supported by a number of public works projects recently announced in the region, a strong uptick in DOT spending activity, and a variety of marquee private sector projects coming on-line in the greater Charlotte region.
Given this expected surge in commercial construction activity in the coming months, it’s logical that Heartland contractors report modestly tighter labor market conditions and a heightened demand for skilled labor. Equally telling, however, contractors in the region anticipate no labor cost inflation over the coming months, signaling that they are aware of the immigration of skilled labor into the market in search of new work. Finally, regional contractors report slightly greater use of commercial credit lines, another sign that business activity in the region is about to pick up momentum in a substantive way.
Western NC: Contractors Post Mixed Results
(Down 3.8%)
The Western NC region looks much like the Eastern NC region for the 1st quarter of 2003, with a modest uptick in the volume of anticipated business activity more than offset by diminished labor market conditions in the form of a reduction in skilled labor availability. In Western NC’s case, however, contractors report current labor availability in the region is fine, but they anticipate encountering labor shortages later in the year. The quantitative unemployment data, in contrast, paint a more optimistic picture of labor availability in showing virtually no change in the level of aggregate unemployment in the Western region. In spite of cautious optimism regarding future business conditions, regional contractors report a diminished willingness to borrow money for business expansion. While financing activity elsewhere in North Carolina was on the rise in the early months of 2003, up 1.7 % in Eastern NC and 3 % in Heartland NC, financing activity fell 4.6 % in the first quarter in Western NC.
Eastern NC: Stronger Business Conditions, But Weaker Labor Availability
(Down 0.2%)
At first glance, it looks like there’s nothing new to report in the Eastern NC region, but the aggregate Barometer statistic obscures a couple interesting developments. First, business expectations are modestly improved among the region’s commercial contractors, with the Business and Economic trends segment of the quantitative index rising 8.9 % for the quarter. Stronger business conditions, however, were completely offset by diminished labor availability within the region, as the Employment and Labor segment of the Qualitative Index fell 9.8 %.
In addition, contractors report an expectation that labor costs will rise modestly in the, a trend that stands in contrast with the region’s overall unemployment rate that remains unchanged from the 4th quarter of 2002.
Upstate and Lowcountry SC: Upstate Follows NC Business Trends; but not the Lowcountry...
(USC - Down 0.7%)
(LSC - Down 8.4%)
Similar to recent economic history observed across the Barometer, the Upstate of SC followed closely with Western NC and Eastern NC in reporting greater optimism regarding future business conditions, slightly weaker availability of skilled labor, and a general level of unemployment unchanged from the fourth quarter of 2003. In keeping with these statistics, Upstate contractors reported slightly stronger demand for commercial credit and a strong uptick in the value of DOT spending in the region.
In contrast with this trend toward improving business conditions, the Lowcountry reported significantly weaker anticipated business activity (down 10.4 %), a substantial softening in the labor market (down 14.3 %), and much weaker credit market conditions in the region (down 15%). This pessimistic business outlook in the Lowcountry caused the region’s overall Barometer score to fall by 8.4 %, represent the largest percentage decline posted within the Carolinas for the 1st quarter of 2003.
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