Construction Industry is Optimistic for 2004

Feb 1, 2004 12:00 PM

Construction executives in the United States reported an unprecedented level of optimism for the health of the construction industry in 2004, according to CIT Equipment Finance, a provider of financial services for the construction industry. CIT surveyed 900 contractors and equipment distributors for its 28th annual Construction Industry Forecast.

The forecast uses an optimism quotient (OQ) as the primary indicator for assessing and comparing the respondents' perceptions of the state of the industry. A number of 100 or higher indicates strong optimism in the industry's one-year outlook, while a number below 100 indicates cautious optimism. The forecast's overall OQ jumped from 89 in 2003 to 103 in 2004, which represents the largest one-year increase in the survey's history and shows that the industry leaders are more positive about the industry's prospects than at any time since 1999.

Construction leaders shared their perceptions of the industry and trends for the coming year in the survey. Eighty-nine percent of the survey respondents expect to generate at least as much net income in 2004 as they did in 2003. CIT also reported that 68% of contractors and 66% of distributors anticipate higher financing costs for 2004. The executives' top concerns for 2004 were insurance, the cost of capital, profit margins, and cash flow.

Along with assessing industry trends, the survey also determined the level of optimism in the nine different regions. Eight regions showed double-digit improvements in optimism, but the most positive region was the West South Central region, which posted the highest OQ of any region in the past five years. Other regions that experienced the highest year-over-year OQ increases were the Mountain, South Atlantic, and Pacific regions. The regions with the lowest OQ ratings in 2004 were the East North Central, West North Central, and Middle Atlantic regions (Table above).