Construction Barometer™ > Most Current Results > News Release - 4th Quarter 2007

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

CONSTRUCTION HOLDS STEADY; SIGNS SHOW PENDING STRESS

May 2008 – Charlotte, NC - While Carolinas AGC Construction Barometer™ business activity for fourth quarter 2007 was virtually unchanged (down 0.8%) from 3rd quarter, there are several signs of increasing stress across the Barometer’s year-end indicators.

Current negative trends in the labor, financial and commodities markets were reflected in the Barometer’s quantitative measures: the Employment & Labor trends segment declined 2%; Business & Economic conditions declined 2%; and Financing Availability dropped 1.5% in 4th quarter. In all cases, there’s a single explanation: Recession.

On the flip side, contractors in both states reported plentiful skilled labor, stable wages, and growing expectations that throughout 2008 and 2009 the Carolinas construction industry will remain a solid buyers’ market for new labor. Most  construction supplies-- excluding petroleum products and structural steel-- are widely available, with prices expected to remain reasonable in coming years. Highway and utility spending remain steady, although a downturn in public work is expected. Contractors also reported that the cost of credit remains quite reasonable, even though there’s increased lender scrutiny for virtually all types of credit requests.

Enter the clouds: while the commercial industry will likely remain stable in the Carolinas throughout most of 2008, contractors expect slower growth— negative growth in some regions-- for 2009.

State vs. State: NC Unchanged (Up 0.1%); SC Shows Drop (Down 2.9%)

Recessionary conditions affecting the national economy appear to be having an earlier and stronger impact on South Carolina (dropping 2.9%) than North Carolina (up 0.1%). NC contractors reported modestly slower construction volume, yet still anticipate at least some industry growth for the remainder of 2008. In contrast, SC contractors reported sharply lower business activity at year-end 2007 and anticipate a much more substantial drop in business throughout 2008.

Financing conditions show a divergent trend, with SC contractors reporting a sharp drop in new commercial loan approvals, while North Carolina approvals remained unchanged. However, both states reported tightening credit market conditions and expect credit for both short- and long-term borrowing needs to become increasingly more difficult to acquire throughout 2008 and 2009.

Regional Economic Highlights 

Heartland NC: Heartland Keeps Pumping (Down 0.5%)
Heartland contractors find themselves in one of the country’s strongest commercial construction markets in early 2008. They reported no change in business activity for the quarter, stable materials and equipment costs, stable labor costs, a constant level of construction financing, and lower borrowing costs. Unfortunately, contractors expect recessionary conditions to appear in 3rd quarter 2008. While labor conditions were attractive for hiring in early 2008, contractors reported doing more work with fewer employees in anticipation of a business downturn. They also are accelerating the purchase of heavy equipment and taking advantage of falling equipment prices brought on by national recessionary conditions.

Western NC: What Recession? (Up 8.5%)
Western North Carolina posted surprising gains (up 8.5%) in virtually all Barometer categories in the 4th quarter. The region’s strongest advance occurred in the labor market, where labor availability largely improved, wage rates remained stable, and contractor demand for new workers remained stable against hiring activity reported in 3rd quarter. At the same time, contractors reported a general strengthening in construction activity, and only modestly higher construction materials costs.

Eastern NC: A Slight Weakening (Down 1.1%)
Commercial activity in the Eastern NC region weakened slightly at year-end 2007 on slowing volume, rising materials costs, and tighter labor conditions. Even so, Eastern NC contractors reported increased difficulty in hiring skilled workers and modestly higher labor rates. Like other regions, eastern contractors expect activity to slow throughout 2008, and are adjusting planned construction equipment purchases accordingly. Commercial credit approvals and heavy equipment purchases remained constant with activity levels observed in 3rd quarter.

Upstate and Lowcountry: Similar Conditions across SC
(Upstate – Down 4%; Lowcountry - Unchanged)
Both the Upstate and Lowcountry regions reported tighter credit conditions, a reduced rate of new loan approvals, constant labor costs, and increasing expectations that business conditions will weaken over 2008. These trends appear more pronounced across the Upstate. However, labor conditions across the 2 regions are quite different. Upstate, contractors reported weakening demand for skilled labor on modestly slower business activity in 4th quarter; Lowcountry contractors reported increased new hiring plans and easier labor market conditions for the next several months due to modestly stronger business activity, a trend likely to be short-lived.

For a more detailed look at the Carolinas AGC Construction Barometer™ results for Quarter 2, 2007 visit www.cagc.org, Construction Market Stats. To participate as a Construction Barometer panelist, contact Lori Tharp at 704/372-1450 ext. 5227 or ltharp@carolinasagc.org.