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Wells Fargo Releases an Optimistic Forecast for the Construction Industry

Tue March 12, 2013 - National Edition
Construction Equipment Guide

Construction contractors and equipment distributors are optimistic that local nonresidential construction activity will improve in 2013, according to a survey by Wells Fargo Equipment Finance, Inc., a subsidiary of Wells Fargo & Company. As part of its 2013 Construction Industry Forecast, Wells Fargo’s Construction Optimism Quotient (OQ) – the survey’s primary benchmark for measuring contractor and equipment distributor sentiment – is at 106 for 2013, marking the second consecutive year with an optimistic reading. An OQ over 100 is considered optimistic sentiment towards year-over-year improvement in local nonresidential construction activity.

“It’s great to see that contractors and equipment distributors expect non-residential construction activity in 2013 to retain the improvements they experienced in 2012,” said John Crum, senior vice president and national sales manager of the Construction Group at Wells Fargo Equipment Finance, Inc. “For most parts of the country, we expect to see modest improvement in overall construction activity and contractors anticipate acquiring additional heavy equipment to support this activity. As a market leader in this industry, Wells Fargo is pleased by this continued optimism and remains committed to helping contractors, equipment distributors and manufacturers obtain the construction equipment financing and leasing they need in order to be successful.”

Highlights of the 2013 Construction Industry Forecast include the following:

Construction is moving ahead. The bell-weather indicator for this survey – the Optimism Quotient – is a very positive 106. Although the number is down from 114 in 2012, it still represents the third highest national optimism reading in the past 13 years with only 2012 and 2005 being higher. Executives continue to express sentiment that non-residential construction activity in 2013 will improve compared to 2012.

The industry expects rental fleets to continue to grow. Optimism among construction equipment distributors remains high. Rental fleet growth is anticipated to play an increasingly important role in the business model of distributors. About half of distributors (50.5 percent) indicated that they expect to increase the size of their rental fleet in 2013. Only 5.5 percent said they expect their rental fleet to decrease in 2013 compared to 2012.

Residential could lead the way. Optimism about the residential side of construction was slightly higher than for nonresidential. There is significance in the fact that more contractors expect residential activity to increase (46.7 percent) than to remain the same (45.5 percent) or decrease (7.8 percent).

Contractors will buy new and used equipment. In 2013, 80.9 percent of contractors indicated that they anticipate buying new equipment and 80.3 percent indicated that they will buy used equipment. These numbers are down slightly from 2012, but the fact that four out of five contractors indicated that their companies intend to acquire equipment should be reassuring for the industry.

This survey marks the 37th year in which Wells Fargo Equipment Finance, Inc., and its predecessors, have published primary research findings for the infrastructure construction industry. Conducted between January 4 and January 18, 2013, the survey includes responses from 347 construction industry executives from across the U.S.

To download the complete report, visit:{18f01273-a35a-4bbd-9a43-15812689842b}_2013_Wells_Fargo_Construction_Industry_Forecast_FINAL.pdf

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