Construction Sector Optimism Highest In 20 Years

A recent survey of equipment distributors and industry contractors by Wells Fargo Equipment Finance is suggesting that construction industry executives are more optimistic about commercial construction activity than they have been since this century began.

John Crum, senior vice president and Construction Group national sales manager at Wells Fargo Equipment Finance, confirmed that many of the survey respondents believe that 2018 could be one of their best years ever.

While most contractors and distributors had a positive outlook on construction activity and industry expansion, fewer expect that growth will continue at the same level. This doesn’t mean that they don’t believe the industry will expand: 73% of contractors predicted expansion in the next two years while those who believed that things would remain the same came to only 19%. Only 9% of distributors and 9% of contractors expected less activity.

2017 was a good equipment sales year, and 2018 is expected to hold further improvements. 76% of distributors said that they expected their new equipment sales to increase while 78% predicted that their used equipment sales would increase. With contractors, 37% indicated that they will buy more new equipment while 27% said they would buy more used.

Rental companies and distributors indicated that they would increase their rental fleets this year, with 55% confirmed that they intended to expand. Only 7% said they would decrease their fleet sizes.

The survey also asked companies that rent construction equipment what they would do if the cost of renting went up. Respondents replied that if rental costs increased from 5 to 15% would make 63% of them consider buying equipment instead of renting.

This forecast can create a need for more construction equipment to be manufactured.

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The Wells Fargo survey also showed that the construction sector net profit expectations are generally positive, but sourcing and paying for skilled labor remains, along with healthcare costs, one of the top concerns that will affect net profits. Concerns over equipment costs and equipment rental costs were also cited by distributors.

Overall, the construction industry is feeling increasingly positive about profits. Approximately 92% of respondents said that net profits will either remain constant or increase from 2017, with 61% anticipating an increase in profitability.

The report results, which were presented in the Construction Industry Forecast for 2018, marks the 42nd year in which Wells Fargo Equipment Finance and its forerunners have carried out a survey of executives in the construction industry to obtain insights into present business trends and conditions, and to assess their outlook on construction activity in the year to come.