Construction Barometer™ > Most Current Results > News Release - 3rd 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 IN EYE OF THE STORM

February 2008 – Charlotte, NC - For 3rd quarter 2007, the Carolinas AGC Construction Barometer rose 0.3%, with virtually every indicator remaining stable. There are very few periods in business history when a banker would rather be a contractor, but this is one, offering commercial contractors a remarkable set of conditions for 2008.

Contractors noted steady activity and widespread availability of skilled labor at stable wage rates; they also reported optimism that these trends will continue throughout 2008. Little impact was reported regarding recessionary conditions facing other parts of the nation and other industries in the Carolinas.

In the Barometer’s Financing Availability segment, contractors reported relatively constant loan demand and a slight drop in new loan approvals. Although it seems lenders are increasingly cautious regarding new loan applications— a trend expected to continue through 2008— contractors are experiencing virtually no difficulty in obtaining new loans.

State vs. State: NC Up 0.2%; SC Up 0.7%

While both NC and SC showed mostly similar Q3 Barometer trends, the labor market improved markedly for SC contractors, with a plentiful supply of workers available at falling wage rates. This easing was much less significant in NC. Paradoxically, SC contractors report slightly lower anticipated hiring plans for 2008, while NC contractors report a hiring uptick.

Both states showed an expected slight drop in demand for heavy construction equipment, and somewhat lesser demand for long-term financing to accompany that drop. In spite of this diminished appetite for new debt, contractors in both states believe that financial market conditions will not tighten significantly in 2008 for new contractor borrowing requests, and credit will remain widely available at reasonable cost.

Regional Economic Highlights 

Heartland NC: Big Labor Market Improvement (Barometer Up 1.0%)
The Heartland NC Barometer score advanced 1.0%, driven upward by substantial improvement in labor conditions. Contractors reported a growing supply of qualified workers and stable wage rates, and therefore have stepped up hiring plans.

Other Barometer statistics in the Heartland reflect the growing recessionary tendencies in the general economy. Slower growth is expected through 2008. Lower demand for construction equipment and materials, falling materials costs, and widespread availability of construction supplies were reported, with expectations that costs will remain flat this year. While overall financial market conditions remained relatively constant, contractors did report somewhat greater difficulty obtaining short-term working capital from area lenders.

Eastern NC: Strong Conditions May Weaken (ENC - Up 0.8%)
Eastern NC contractors reported modestly stronger business activity, but expect deterioration in commercial construction project growth through early 2008. A strengthening labor market, stable industry wages, and stable equipment and materials costs were reported; as well as expectations of stable and manageable construction inflation rates in 2008. Contractors report diminished loan approvals, tightening lending standards, and a tightening commercial credit market.

Western NC: Weak Conditions May Strengthen (WNC - Down 8.4%)
Western NC contractors reported sharply lower business activity at the end of 2007; but this trend is expected to reverse in 2008 with a substantial increase in projected commercial construction. The Barometer statistics showed a strengthening labor market, stable industry wages, and stable equipment and materials costs, with expectations that these will remain stable throughout 2008. Western contractors report significantly greater difficulty in acquiring both short- and long-term credit from area lenders.

Upstate and Lowcountry SC: Help (Not) Wanted Here...
(USC - Up 1.2%; LSC - Down 0.7%)
In spite of marked improvement in South Carolina labor market conditions, contractors in both the Upstate and Lowcountry reported diminished plans to hire new workers in 2008. Both reported increasing availability of labor, stable-to-falling construction wage rates, and similar expectations that labor costs will remain extremely manageable in 2008.

Sharply lower hiring plans across South Carolina, particularly for the Lowcountry, don’t appear to be driven by sharply lower expectations for business growth in 2008. Upstate contractors expect a modest increase in activity, while Lowcountry contractors expect to at least match levels observed in 2007. In both regions, contractors reported stable materials and equipment costs.

In contrast with tightening financial market conditions in North Carolina, both Upstate and Lowcountry contractors reported relatively stable availability of short- and long-term credit in the third quarter, and no significant change in lender attitudes regarding contractor borrowing requests. The only grouchy bankers in the Carolinas seem to be located in the Tar Heel.

Carolinas AGC builds its 2,800 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 CAGC members.

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.