Staff Report
Published June 29, 2011

The Carolinas AGC Construction Barometer, reflecting the first quarter of 2011, showed little change in the construction industry in both North Carolina and South Carolina.

The aggregate Barometer score declined 0.8% on slightly stronger business conditions observed across the first three months of 2011, offset by falling contractor expectations about future business conditions and rising wholesale prices, the construction association said.

The report says business confidence is down 2.9% in the Upstate.

The Upstate panelists reported falling labor demand, moderately rising construction materials and equipment prices, and diminished optimism concerning industry conditions projected for 2012. While there is a bright spot — private construction has risen in the region — it’s somewhat overshadowed by slightly falling highway spending.

Labor market conditions seem significantly weaker than last quarter, with reports of greater difficulty in hiring skilled workers, rising labor costs and an expectation that labor cost inflation will continue into 2012. Demand for heavy equipment and inventory purchases declined, a trend expected to continue throughout 2011.

Construction volume increased throughout the Carolinas for the first three months of 2011, surpassing contractors’ expectations for the quarter and leading to a slight increase in labor demand, the AGC said.

Given the substantial contraction in the construction labor market over the last few years, contractors reported difficulty in hiring skilled workers because so many have migrated to other industries, AGC said. At the same time, contractors reported rising labor costs, particularly in the employee benefits area.

But the first quarter’s business improvement isn’t carrying forward into the remaining months of 2011, AGC reported. In previous quarters, barometer panelists reported increased optimism for 2012 due to fewer contractors remaining in business and expectations of more work coming down the pipeline.

However, panelists now believe that 2012’s business conditions may be a bit worse. They’re expecting modestly diminished business activity, a lower rate of equipment and inventory purchases, reduced hiring activity, and weaker demand for long-term credit toward the end of 2011 and into the early months of 2012.