Construction Barometer™ > Previous Quarter Results > News Release - 3rd Quarter 2003

(Based on 3rd Quarter Results)

Construction Barometer Shows Brighter Horizon

It’s rare when virtually all economic and financial indicators in the Carolinas AGC Construction Barometer™ point in the same direction at the same time, but that’s exactly what happened in third quarter 2003. Almost every economic yardstick measured pointed upward, contributing to the Barometer’s 4.3% overall gain, especially the information gathered from hard, quantitative data. But don’t break out the champagne just yet…

The bottom line is that while the Carolinas construction industry is indeed recovering from the recession, it’s not recovering quite as quickly, or strongly, as the national and regional economy. More and more, the current economic recovery appears to have quite strong legs, and improving business conditions seem here to stay. But, we’re not getting our share of the pie just yet.

A sign of our construction economy’s slight weakness in the face of a strong national and regional economic growth is the disparity in the numbers between the Barometer’s quantitative (hard data) and qualitative (contractor and industry opinion) indicators. The quantitative indicators are up sharply, posting a 9.1% for the 3rd quarter; the qualitative indicators, in contrast, are entirely flat, with contractors indicating very little change in construction industry business conditions.

Improving labor market conditions and financing availability largely explain the rapid run-up in the quantitative indicators. Falling unemployment within the general Carolinas labor market just isn’t showing up yet in new construction jobs. Contractors aren’t taking advantage of low borrowing costs because business conditions just aren’t yet strong enough, and real growth in construction revenues remains sufficiently elusive, to take on any additional leverage.

On both the quantitative and qualitative sides of the Barometer, the Business and Economic trends segment is showing steady improvement. Consistent with the other indicators, however, the uptick in the hard, economic numbers is more positive than the contractor confidence level.

While conditions are improving somewhat slowly for the moment, the second half of 2004 will likely be better for contractors in both states. One of the best leading economic indicators of future business conditions in the Barometer is the rate at which contractors report they’re anticipating the additional purchase of heavy equipment and capital assets. In every region of the Carolinas except Lowcountry SC, this statistic is pointing upward for the first time in two years.


In looking at the two states individually, over the six-year history of the Barometer it’s become evident that the South Carolina construction economy is more volatile and difficult to predict than the North Carolina economy. This trend rings true in the present economic quarter, where the Barometer advanced 7.8% in South Carolina while moving up only 2.7% in North Carolina. South Carolina contractors report greater anticipated construction industry hiring, more confidence in strengthening business conditions, and a stronger appetite for purchases of heavy equipment and business inventory.

South Carolina’s quantitative data posted a 15.6% gain in comparison with North Carolina’s 6.3% gain. This trend is consistent with South Carolina’s reported demand for labor, on the upswing at a far more rapid pace than in North Carolina. It’s too early to report if this trend is sustainable over time, but for the moment, the South Carolina construction economy is improving at a more rapid pace than North Carolina.

Regional Highlights

Heartland NC up 2.3%

North Carolina’s largest and strongest economic region posted a very slow rate of Barometer growth in the third quarter 2003. Consistent with contractor expectations of rising business activity reported in early 2003, the quantitative results for this quarter do indicate that business and economic trends are up in the region, as many of the high-end construction projects in the State’s largest urban areas are coming on-line. However, contractors reported virtually no increase in anticipated business activity for the remainder of 2003, indicating that the headline-grabbing commercial construction projects just begun within the region haven’t led to a resurgence in commercial construction activity throughout the region.

Although Heartland contractors reported flat construction sales and very little appetite for new workers, given the size of the region and the presence of a few large commercial construction projects underway, construction labor throughout the state is heading for the region.

Western NC up 1.2%

Business conditions in Western North Carolina parallel the trend in the Heartland, with perhaps a bit more pessimism. Contractors reported slightly diminished business volume, and the gains in economic activity just don’t seem to be holding up for any length of time. In addition, Western NC contractors reported a reduction in skilled labor available, most likely stemming from the migration of workers to the Heartland region in search of relatively greener construction pastures. Regional contractors anticipate modest rises in labor costs in early 2004, as construction companies must offer a slight wage premium to encourage skilled laborers to return to the area.


Eastern NC up 4.4%

In contrast to the diminished rate of economic growth affecting the Heartland and Western NC regions, contractors in the east reported that the increased economic activity in the construction sector observed earlier in 2003 held steady. Virtually all quantitative indicators were up for third quarter in the Eastern region, and contractors expect slightly stronger business volume on the qualitative side of the index, too.

The only negative trend evidenced for the quarter is the same sort of tightening labor market for skilled workers observed in the Western region.

Upstate SC up 7.9%

With the Employment and Labor trends section of the Barometer for the Upstate up 36%, contractors reported a stronger appetite for new workers. This result seems somewhat paradoxical since these same contractors reported a much slower rate of anticipated construction industry growth than their Lowcountry colleagues. However, if contractors’ expectations materialize, much of the labor migration experienced from Eastern and Western North Carolina into the Heartland region could turn south and head for the Upstate South Carolina area.


Lowcountry SC up 7.3%

The Lowcountry region posted a 13.7% rise in Business and Economic trends on the qualitative side of the index. Based on this rise, it appears that Lowcountry contractors expect a strong business growth in early 2004. However, unlike all the other regions in both North and South Carolina, the Lowcountry was the only region where contractors didn’t report an anticipation of additional purchase of heavy equipment and capital assets.

 

For members only: get an exclusive analysis of how this information affects your business planning at www.cagc.org, Construction Market Stats. Additional general information on the Carolinas AGC Construction Barometer is also available to anyone. For questions: Lori Tharp 704/372-1450 ext. 5227; e-mail ltharp@carolinasagc.org.