US construction not to see significant recovery until 2013 – survey

23 January 2012 21:15  [Source: ICIS news]

HOUSTON (ICIS)--Fewer US construction firms plan to lay off workers this year than in 2011, but the industry will not see significant recovery until 2013, according to a survey and outlook released on Monday by the Associated General Contractors of America.

“The construction industry will improve this year but we are going to have to wait until at least 2013 before contractors experience the kind of recovery this industry needs,” said Ken Simonson, the chief economist for the trade group.

Association CEO Stephen Sandherr said that according to the survey of some 1,300 construction firms, fewer companies plan to make layoffs this year, only 9% in 2012 compared with 37% last year and 55% in 2010.

Also, 32% of the firms indicated they plan to add new staff in 2012. Half of those firms report plans to add six or more new employees during the next 12 months.

Sandherr said the industry added nearly 50,000 jobs in 2011 but added it has a long way to go for a full recovery. The industry has shed more than 2m jobs since 2008, he said.

The American Chemistry Council (ACC) estimates that for every $1,000 (€780) spent on construction of roads, office buildings and schools, about $25 is expended for chemicals or derivative products.

According to the council, as much as another $200 of every $1,000 in general construction spending represents outlays for related items, such as construction equipment and machinery and worker health care, that in turn are consumers of chemicals in manufacturing processes or services.

Roughly three-fourths of the contractors said they expect the power, hospital and higher education construction markets to expand or remain stable this year.

However, contractors working in market segments typically funded by the public sector are more pessimistic, according to the survey.

Forty-four percent of contractors expect the market for new public buildings to shrink, 4% expect the market for school construction for grades kindergarten through 12 to shrink, and 40% expect the highway market to contract.

Sandherr added the impact of the US federal stimulus funding package on construction is fading. Seventy-five percent of the survey respondents said they do not expect any more stimulus funded work.

In addition, many contractors report they continue to be affected by tight credit. Nearly half – 49% – reported that tighter lending conditions have forced their customers to delay or cancel construction projects.

Eighty-six percent of firms said they expect their raw materials prices to increase in 2012, and 80% said they expect bid levels to stagnate or decline this year.

Also, 81% reported their health care costs increased in 2011, and 82% expect their health care costs to increase in 2012.

($1 = €0.78)

By: Brian Ford
+1 713 525 2653

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