Outlook for construction industry improves in 2013

More construction firms are planning to add staff than cut staff this year, and demand for some private sector construction projects should increase, according to survey results released Monday by the Associated General Contractors of America and Computer Guidance Corp.

The survey provides a generally optimistic outlook for the year even as firms worry about rising costs and declining public sector demand for construction.
“While the outlook for the construction industry appears to be heading in the right direction for 2013, many firms are still grappling with significant economic headwinds,” Stephen E. Sandherr, the association’s CEO, said in a statement. “With luck and a lot of work, the hard-hit construction industry should be larger, healthier, more technologically savvy and more profitable by the end of 2013 than it is today.”

Sandherr noted that significantly more firms are planning to add staff this year, 31 percent of those surveyed; compared to the number of firms expecting to make layoffs, 9 percent.

In Virginia, 33 percent of surveyed companies said they play to add staff, while another 33 percent said “don’t know.”  If they do add staff, the companies said it would be five or fewer employees.

Compared to 2012, contractors here expect the available dollar volume of projects to be higher in 2013 in the power and hospital and higher education industries and in K-12 school construction.
This response tracks with the survey’s national results. According to Sandherr, firms are most optimistic about the outlook for hospital and higher education construction. He noted that 36 percent of firms predict the amount of money spent on those projects will grow in 2013 while 39 percent of firms expect the market will remain stable compared to last year. Contractors also were optimistic about the markets for power construction, but had lower expectations for manufacturing, private office and retail, warehouse and lodging construction.

Meanwhile, contractors expect demand for many types of public construction to decline in 2013.
A significant – but smaller than last year – number of contractors also report that customers’ projects have been delayed or cancelled because of tight credit conditions. Forty percent of responding firms report that tighter lending conditions have forced their customers to delay or cancel construction projects. Only 3 percent of firms reported having an easier time getting credit while 41 percent report no change in credit conditions.

“Unfortunately, there are almost as many causes for concern as there are signs of optimism,” said Ken Simonson, the association’s chief economist. “Demand for public buildings is set to decline, manufacturing work appears to be slackening, materials prices and health care costs continue to rise and many firms are reluctant to make major investments in new equipment.”

The outlook, co-sponsored by the Arlington-based trade association, was based on survey results from more than 1,300 construction firms from 49 states, the District of Columbia and Puerto Rico.