Construction Barometer™ > Previous Quarters Results > News Release - 3rd Quarter 2006

For additional information or names of local panelists contact:
Lori Tharp, Associate Dir., Business Development, Carolinas AGC
(704) 372-1450, ext. 5227; ltharp@carolinasagc.org ; www.cagc.org

Carolinas AGC Construction Barometer™
February 2007 – Charlotte , NC

CONTRACTOR OPTIMISM PUSHES INDUSTRY INDEX TO 3-YEAR HIGH

The Carolinas AGC Construction Barometer™ advanced sharply in 3 rd quarter 2006, rising 3.9% for the second-strongest gain ever recorded in the index's 9-year his to ry. The current 2.91 Barometer value on a scale of 1-5 is just below the mid- 2003 high.

Just about every business yardstick captured within the quarter 3 index moved upward, and measures not advancing still remained constant.

Reflecting contractor optimism, the Barometer's qualitative series posted the strongest gains, rising 9.4% on strengthening labor market trends, stronger business conditions, and an improved outlook for financing availability in 2007. "Business and Economic trends surged a remarkable 16.5% on falling materials and equipment costs, rising expectations for the upcoming construction season, and growing optimism that materials, equipment and labor costs will remain stable.

The qualitative series also showed improved financial market conditions (up 6.3%) and strengthening employment and labor conditions (up 5.8%). Contractors reported easier short- and long-term credit availability, and stable borrowing costs; this trend is expected to continue through 2007. Improved Employment and Labor market conditions reflect stable labor costs, widespread availability of skilled labor, and growing expectations for continued stability.

On the Barometer's quantitative side, most business indicators remained unchanged from 2nd quarter 2006.

The Barometer™ trends are parallel across the 2 Carolinas, with a moderately stronger growth trend in North Carolina. In both cases, however, strengthening business conditions follow from increased contractor optimism regarding projected industry growth in 2007, and stable construction materials and equipment prices.

Regional Economic Highlights

Heartland NC : Labor Cost Inflation on the Horizon? (Up 2.2%)

Trends in the Heartland region follow statewide trends with one curious exception. In most Carolinas regions, the Barometer's Business and Economic trends and Employment and Labor Market indica to rs are closely aligned, with stronger business growth associated with rising hiring activity. In the Heartland, however, hiring plans remain virtually unchanged from earlier 2006; and contractors reported increasing trepidation that increased business activity could lead to worker shortages and rising wage rates by mid-year 2007.

Eastern NC : Big Gains down East (Up 7.6%)

Eastern NC experienced the largest regional gain in Barometer scores for 3 rd quarter. Like other regions, its strongest advance occurred across the Business and Economic trends segment on growing contrac to r optimism regarding expected industry growth in 2007. However, Eastern contractors reported significantly better credit market conditions, with increased loan approvals, better short- and long-term financing offers, and heightened expectations that credit market conditions would continue to improve in 2007.

Western NC : West Prepares for winter (Up 4.7%)

Western contractors reported significantly improved business conditions, but its Barometer gains were constrained by falling economic indicator values. Breaking with a trend observed across all other regions for the quarter, the West experienced a 6.8% drop in Employment and Labor market conditions, a 5.9% drop in Business and Economic trends, and a 2.2% drop in Financing Availability. It appears that Western contrac to rs see a cold, wet winter; followed by an active construction season.

Upstate SC: Business Improves (3.6%)

Upstate SC contrtactors expect sharply stronger business conditions for 2007, leading the region's aggregate Barometer score upward by 3.6%. Slowing short-term business activity in the region was offset in 3rd quarter by both strengthened Employment and Labor market conditions (up 11.2%) and rising Financing Availability (up 11.5%). Contractors reported a ready supply of skilled labor, no upward pressure on wage rates, and rising expectations that labor will remain widely available at reasonable cost throughout the 2007 season. Financial market conditions in the Upstate improved due to falling credit costs, widespread reports of easier credit availability, and growing contrac to r optimism that interest rates will fall in 2007.

Lowcountry SC : Labor Availability Deteriorating? (Up 0.1%)

Strengthening Business and Economic conditions (up 11.3%) in 3 rd quarter were tempered by increasingly tight labor market conditions, where the Employment and Labor market trends segment fell 8.8%. Contractors reported moderate tightening in available skilled workers, and appear to anticipate slightly higher wage rates in 2007-- a contrast to the labor cost stability expected elsewhere in the Carolinas. Lowcountry contractors also continue to report tightening credit market conditions and rising commercial borrowing costs, but reported no change in the volume of new loan approvals.

Carolinas AGC builds its 3000 members' businesses through workforce development, business development, profit management, and CompTrust AGC –a self-insured workers' compensation trust for members. More than 75% of commercial and industrial construction (buildings, highways/bridges, utility facilities) in both North and South Carolina is performed or supported by Carolinas AGC members.

For more in-depth analysis visit www.cagc.org and see Construction Market Stats.