96 percent expect to buy new, used equipment; 92 percent give nod to rentals
For the eighth consecutive year, construction industry executives say they feel optimistic about the year ahead for their business sector, according to the 43rd Wells Fargo (NYSE:WFC) Construction Industry Forecast released. The 2019 forecast reveals sustained confidence for the industry and expectations that expansion is more likely than contraction. The results are a tempered decrease from 2018 record-high optimism.
Conducted by Wells Fargo Equipment Finance in late 2018, the survey tallied opinions of industry contractors, manufacturers, and equipment distributors to determine the National Optimism Quotient (OQ) — a key indicator of whether or not local, nonresidential construction is likely to increase or decrease in the coming year. The 2019 OQ remains in strongly optimistic territory at 122. Although optimism declined slightly from 133 in 2018, most executives maintain an encouraging outlook on industry expansion and 2019 net profits.
OQ scores above 100 represent strong optimism for increased local construction activity relative to the perceived level of activity the prior year. Scores between 75 and 99 denote more cautious or measured optimism. A score below 75 signals a more pessimistic point of view, where fewer executives say local construction activity will increase than say it will decrease.
“Even if this year’s activity remains the same as last year, many see it as a positive for the industry due to significant growth over many years,” said John Crum, Construction Group national sales manager for Wells Fargo Equipment Finance. “If 2019 turns out the way survey respondents indicate, we could be in for another good year.”
To weigh future business decisions, Crum urges business owners to consider the full-report details and also read respondents’ verbatim comments about the industry printed throughout the report.
In addition to determining the OQ, the 2019 survey posed questions about equipment sales and purchase expectations, rental market trends, and major concerns and challenges that industry participants identified as relevant to their businesses.
Top learnings for 2019 from the Construction Industry Forecast include:
- New equipment levels expected to be maintained or increased
Ninety-six percent of contractor respondents plan to purchase new or used equipment in the coming year. Of those, 76 percent intend to maintain or increase their purchases of new equipment compared to 2018. Three-fourths of contractors say they will increase or maintain their level of purchasing used equipment, and nearly 13 percent don’t plan to purchase used equipment at all.
- Contractors intend to maintain or increase rental equipment levels
Ninety-two percent of contractor respondents intend to maintain or increase their level of rental activity. Forty-six percent of equipment renters identify flexibility as the primary reason — far above other reasons for renting identified in the results, including renting costs.
- Finding qualified workers remains a concern
Ability to hire qualified workers is the No. 1 concern among survey respondents in two categories: Forty-seven percent of contractor respondents cited hiring qualified workers as their top cost concern; 36 percent of all respondents pegged it as the leading risk to the industry. Executives ranked qualified workers above the impact of healthcare costs, employee wages and benefits, tariffs, interest rates, and equipment.
How does Optimism Quotient compare to other key economic indices?
Although there are outlier years, data over time shows that the OQ tracks closely with four economic indices that are significant to the construction industry outlook:
- Architectural Billings Index
- Private Construction Index
- Industrial Production Index
- Public Nonresidential Construction Index.
More about the Construction Industry Forecast
The 2019 Construction Industry Forecast results represent the 43rd year in which Wells Fargo Equipment Finance has surveyed construction industry executives to gather insight into current business conditions and trends and to measure sentiment about activity in the year ahead. Responses came from 441 construction industry executives in 48 U.S. states. Nearly all of the respondents reported that they have been in the industry five years or more. To learn more, download the complete report.
About Wells Fargo Equipment Finance
Wells Fargo Equipment Finance provides competitive fixed- and floating-rate loans and leases covering a full range of commercial equipment for businesses nationwide as well as floor planning and inventory financing and vendor programs in selected industries in the United States and Canada. Wells Fargo Equipment Finance is a leading bank-affiliated equipment leasing and finance business in the United States by asset portfolio and annual originations, with more than 335,000 customers and 2,500 team members. Wells Fargo Equipment Finance is the trade name for certain equipment leasing and finance businesses of Wells Fargo Bank, N.A. and its subsidiaries. Equipment financing transactions are provided in Canada by Wells Fargo Equipment Finance Company.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 7,800 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 37 countries and territories to support customers who conduct business in the global economy. With approximately 259,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.
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Trina Shepherd, 312-339-0012