According to the Wells Fargo annual survey results, the forecast calls for optimism.
In fact, the OQ (optimism quotient) for 2019 is 122, which is strong. Any result over 100 indicates strong optimism for the industry, so this year’s result is promising. Industry executives overwhelmingly feel that construction, at various levels, is going to expand. Compare that to the OQ from just ten years ago, which sat at 42.
Top results from the survey
In its 43rd year of running, the annual survey provides insight from over 440 industry executives, across 48 states. It’s a fascinating approach to allow businesses throughout the industry to get a sense of direction and flow for their own models. As it also tracks with other economic indices quite closely, it’s a good predictor of the kind of year our industry will have.
The following are the top results from the 2019 survey:
- The area that executives are most concerned about? Finding enough qualified, skilled workers. To quote the report itself: “The ability to hire qualified workers is the #1 concern among survey respondents in two categories. 47% of contractor respondents cited the ability to hire qualified workers as their #1 cost concern and 36% of all respondents cited it as the #1 risk to their business. They ranked it above the impact of healthcare costs, employee wages and benefits, tariffs, interest rates, and the cost of equipment.” This represents the top business risk for all sizes of companies, within the industry.
- There is some concern about the impact on business because of tax reforms, interest rates, and tariffs. A significant percentage of larger companies, in particular, feel that the impact of both tariffs and interest rates could post the greatest risks, financially, going forward. There is some uncertainty as to what will be coming down the pipeline, which is fueling the lack of clarity around this concern. Tax reforms and the Highway Funding Bill are at the top of the list in terms of issues that are of greatest importance to the ongoing success of a company. That said, there is reason for optimism, with positive economic forecasts and greater consumer confidence, topping the opportunities that respondents saw.
- With that said, an increase in equipment spending is still expected, to the tune of 96% of respondents indicating that they would be making purchases (new or used) within the year.
- Rentals will remain steady, with the companies that aren’t currently seeing a heavy backlog of jobs considering rental to be more fiscally appropriate than purchasing. Distributors, however, are feeling that growth for them is on the horizon.
When asked what will most change the industry in the future and what will drive that change, many responses circled around the notion of technology and automation. Instead of fearing these as elements that might eliminate jobs however, the industry clearly sees this as an opportunity to build stronger workforces that are founded on skill. The key will be to attract a young, educated in tech workforce to an industry that has not traditionally been viewed as tech forward. It is the lack of those available skilled workers, along with ongoing improvements to available technology, that will drive that change.
OE Construction is a specialty contractor in the commercial area of the industry and is thrilled to participate annually in the survey. The resulting insights are always interesting and informative.