Contractors report low expectations

South Carolina contractors seem more optimistic about future business activity than their colleagues in North Carolina, though the market isn’t expected to improve, according to the latest Construction Barometer released today by Carolinas AGC.

GSA Daily Staff Report
Published Oct. 14, 2010

In South Carolina, the Lowcountry posted a strong 9.4% gain in its Construction Barometer for the second quarter. Carolinas AGC attributed the growth to big gains in skilled labor availability and improved credit market conditions. In spite of these reported improvements, Lowcountry contractors reported falling demand for labor and no change in borrowing plans for the remaining months of 2010.

The Upstate’s barometer, meanwhile, dropped 1.6%. Lowcountry and Upstate contractors both reported weaker construction activity and falling overall construction costs.

In the Lowcountry, gains in business activity are expected to occur in public works spending areas, with contractors projecting a significant increase in highway and municipal utility spending for the coming year. In contrast, Upstate contractors expect diminished highway and utility spending but a healthy uptick in private commercial work in the coming year.

South Carolina fared better than North Carolina during the second quarter, with a 1.5% increase in its Construction Barometer, compared to a 0.8% increase for North Carolina.

A slight dip in spring activity was offset by falling materials costs, lower overall construction supply costs and record-low interest rates, AGC reported. Continuing fiscal stress across the region's state and local governments, along with the diminished federal stimulus spending, suppressed the level of public highway and utility projects usually observed during second quarter, however.

Contractors reported that they expect the low level of public works construction to continue into 2011, which largely accounts for much of the diminished expectations for overall growth in 2011.

Seasonal hiring increased slightly, but Carolinas AGC doesn’t expect that to be a trend.

Financing remains a concern. Contractors reported continuing record-low interest rates for both short- and long-term borrowing, but no contractors reported placing new loan applications during the second quarter.

Industry conditions for 2011 aren't expected to weaken significantly, Carolinas AGC reported, but improvement is unlikely.

N.C. contractors reported a modest uptick in second quarter hiring, while S.C. contractors reported no change.

Financial market conditions differed slightly across the two states as well. South Carolina contractors reported easier credit terms from regional bankers, while North Carolina contractors reported a modest tightening in the availability of credit and banker willingness to underwrite new contractor loans.