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Survey: Contractors’ Confidence in Economy Falls 40 Percent

Sat September 09, 2006 - Midwest Edition
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Construction and contractor industry confidence in the economy has dropped by approximately 40 percent in the past three months, according to the results of an International Profit Associates Small Business Research Board (IPA SBRB) survey released in August.

The IPA SBRB Construction/Contractor Confidence Index fell to 30.7 for the most recent poll completed earlier this month, down from an index of 49.3 in May. By contrast, this outlook was far more pessimistic than that of all small businesses for which the IPA SBRB Small Business Confidence Index (SBCI) dropped approximately 20 percent to 39.3 from 47.3 during the same three-month period.

According to the results of the newly issued survey, 26 percent of the respondents had confidence in the general economy versus 48 percent in May. Concurrently, 38 percent of the respondents in the current poll indicated disappointment with the direction of the economy an increase of 11 percent from the 27 percent who expressed that opinion in May.

Nevertheless, 52 percent of the construction and contracting firms responding to the survey said that they are estimating revenues for the year will be approximately the same as last year while 40 percent said they would be better than their 2005 performance.

Of the respondents, 49 percent said they intend to maintain current workforce levels while 26 percent said they intend to increase hiring with 14 percent decreasing hiring and 9 percent of the construction and contracting firms unsure of their plans.

“The precipitous drop in confidence among the construction and contracting trades mirrors the concern we have heard from developers and builders about the slowdown in housing purchases and softness in commitments for new commercial projects,” said Gregg Steinberg, president of International Profit Associates, a provider of management consulting and professional services to small and medium-size businesses in North America.

“This data is alarming, though, both in how quickly the confidence among owners and managers of construction and contracting firms has changed as well as the steepness of the decline,” Steinberg added. “The confidence of construction and contracting firms, which had greater confidence than the universe of all small businesses just three months ago, has dropped by twice as much.”

The cost of materials, energy and fuel costs, and taxes are listed by the respondents as their three leading business issues. The cost of materials was described by 25 percent of the participants as the leading concern (the same as the previous period), 15 percent named energy and fuel as a leading issue — an increase from 3 percent of the respondents in the May 2006 report. Taxes were listed by 14 percent as the leading issue.

As far as other areas of interest, construction and contracting firms had varied opinions about being prepared to handle emergencies, whether the minimum wage should be raised and the fate of the estate tax — all of which were similar to the universe of all small to medium-size businesses.

Of the construction and contracting firms, 27 percent said they have a disaster or emergency plan ready, an increase of 15 percent from the post 2005 hurricane season. Significantly, 72 percent still do not have a plan in place (only 1 percent better than the 73 percent of all small businesses that do not have such a plan).

Construction and contracting firms are split about the minimum wage, with 49 percent in favor of it being raised, 28 percent opposing it and 23 percent not certain.

The view on estate taxes are mixed as well with 40 percent opting for them remaining as they are, 31 percent abolishing them, 14 percent looking for a “change” and 15 percent unsure.

The IPA SBRB ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations.

The IPA SBRB research includes studies of specific industry segments, such as construction, contracting and manufacturing.

Participants in IPA SBRB polls provide feedback on significant issues and allow for real-time insight into the state of small businesses nationwide. The universe of participants is developed from among small businesses across the United States. IPA SBRB studies are voluntary surveys conducted via phone and e-mail. Polls are structured and supervised through an independent resource.

For more information, visit www.ipa-iba.com.