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Wells Fargo Survey Forecasts Non-Residential Construction Activity to Increase

By ALM Staff | Law Journal Newsletters |
February 28, 2012

According to a recent survey by Wells Fargo Equipment Finance Inc., construction contractors and equipment distributors are optimistic that local non-residential activity will improve in 2012. The company's 2012 Construction Industry Forecast, Wells Fargo's Construction Optimism Quotient (“OQ”) ' the survey's primary benchmark for measuring contractor and equipment distributor sentiment ' is at 114 for 2012, marking a material increase from 96 in 2011. An OQ over 100 is considered optimistic of year-over-year improvement in local non-residential construction activity.

Highlights of the 2012 Construction Industry Forecast:

  • The OQ of 114 is a strong indicator that the industry expects 2012 non-residential construction activity to improve from last year. The 2012 OQ exceeds the score of 109 recorded in 2005, near the height of the construction boom. After falling to an all-time low score of 42 in 2009, the OQ climbed to 66 in 2010 and 96 in 2011.
  • In spite of rising optimism over the last three years and strong optimism for 2012, industry executives remain cautious about the amount of available work to sustain the current number of non-residential construction contractors. About four in 10 respondents (41.7%) said they expect fewer contractors in their markets by the end of the year. Only 10.4% expect the number of contractors in their area to increase in 2012.
  • Equipment distributors are very optimistic. When asked about their forecast for new equipment sales, 73.3% said they expect to sell more in 2012 than in 2011, and zero respondents said they expect a decrease in new equipment sales. Optimism among construction equipment distributors was high with nearly six in 10 distributors (58.1%) expecting an increase in local non-residential construction activity. Only 1.5% said they expect that activity to decrease in 2012.
  • Contractors are less optimistic. While 18.3% of contractors said they expect to acquire more new equipment in 2012 than they acquired in 2011, 52% said they would acquire the same amount and 29.2% said they expect to buy less new equipment in the coming year. Some 40.3% of contractors said they expect non-residential construction activity to increase in the coming year; 47.3% expect the same level; and 12.4% said they expect non-residential activity levels to decrease.

This survey marks the 36th year in which Wells Fargo Equipment Finance, Inc. and its predecessors have published primary research findings for the infrastructure construction industry. Conducted between Jan. 4 and Jan. 15, 2012, the survey recorded the responses of 394 construction industry executives from across the United States. The full survey may be accessed at https://a248.e.akamai.net/f/248/41008/14d/ig.rsys3.net/responsysimages/wells/__RS_CP__/2012WellsFargoConstructionIndustryForecast_FINAL.pdf.

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