Construction Barometer™ > Previous Quarter Results > News Release - 2nd Quarter 2003

(Based on Second Quarter 2003)

Carolinas AGC Construction Barometer™ Holds Firm
Year’s Advancing Business Activity Trend Stabilizes

CHARLOTTE, NC - Oct. 8, 2003 - The most recent Carolinas AGC Construction Barometer™, tracking hard data as well as opinions among contractors and industry allies, held its own in second quarter 2003, declining a very slight 0.8% to 2.95 on a scale of 1-5. It appears that the improved business conditions for commercial contractors first observed in Barometer results for first quarter 2003 are holding.

The trend toward stronger economic growth doesn’t appear to accelerate in the second quarter, however, in spite of the normal seasonal uptick in business activity. This may largely be attributable to the record rainfall across both Carolinas, resulting in postponed project initiation dates and lengthened completion schedules throughout the construction industry. It’s also likely that growth in Carolinas commercial construction has been dampened somewhat by negative economic shocks affecting the textile, furniture, and manufacturing industries in North Carolina.

The modest change seen in the Construction Barometer is in response to two offsetting factors—the Business & Economic Trends section of the quantitative indicators, and Employment & Labor Trends section on the qualitative side of the index. Business & Economic Trends data advanced 3% in the second quarter on strengthening expectations for business volume in North Carolina, largely attributable to improved highway and utility spending in rural areas.

These gains were offset almost exactly by a 3.4% drop in the subjective Employment & Labor Trends section, stemming from increasing contractor pessimism regarding pending labor shortages as business conditions improve. Modest labor shortages are already apparent, with Heartland North Carolina and Upstate South Carolina contractors reporting slightly greater difficulty in attracting and keeping skilled labor.

Looking at other costs associated with the construction business, contractors report no equipment and materials cost inflation throughout the region. This trend is expected to continue through most of 2003. In spite of stable costs and record-low interest rates, however, few contractors reported an increased appetite for major business expenditures in the second quarter results, although bankers remain increasingly receptive to contractor borrowing. Like most other observers of the American business landscape, contractors expect a modest increase in borrowing costs in the waning months of 2003.

State-By-State Overview

Reflecting past trends in Barometer activity, business conditions in South Carolina were more volatile than in North Carolina for the second quarter, with the Palmetto state index falling 1.7%, while declining only 0.3% in the Tar Heel state. Deteriorating business conditions in South Carolina reflected a number of trends, including a weakening labor market, diminished borrowing plans due to rising interest rates, and slightly lower scoring on Business & Economic Trends section.

In particular, it’s worth noting that the Business and Economic Trends segment on the quantitative side of the Barometer fell 2% in South Carolina while rising 5.3% in North Carolina, and the Employment & Labor Trends segment on the Barometer’s quantitative side fell 2.5% in South Carolina while falling only 0.8% in North Carolina.

Weaker labor market conditions in South Carolina are attributable to a slight increase in the Lowcountry unemployment rate and revised contractor expectations for lower labor demand in the region. The weakening Lowcountry labor market does not appear to be a problem in the Upstate, where unemployment rates remained unchanged from the first quarter and contractors report no change in the number of construction positions anticipated in 2003.

Across the Business & Economic Trends, South Carolina contractors report diminished DOT spending and diminished expectations for highway and utility spending growth in 2003. In contrast, North Carolina contractors report no decrease in expectations for highway and utility spending. Finally, South Carolina contractors, particularly in the Lowcountry, report a diminished demand for heavy equipment purchases and rentals. In contrast, North Carolina contractors report significantly stronger demand for construction equipment purchases and rentals in the second quarter, reflecting the expectation of higher construction business volume over the remaining months of 2003.