Each year businesses face new opportunities and challenges.
The issues often vary depending on a company’s size, industry, service/product offering, human resources, access to capital financing and more. While some of these issues are limited to a company’s unique situation, others are heavily impacted by industry trends and forecasts. For those in the construction industry, it’s essential to have a clear understanding of market outlook, demand and growth areas for proper planning. According to the Wells Fargo Construction Industry Forecast for 2018, there is a positive outlook from both distributors and contractors for this year and beyond. Ongoing demand for services will fuel both industry and company growth in many sectors. To help clients, prospects and others understand key industry trends and how it will impact them, Hanson & Co has provided a summary of survey findings below.
About the Survey
The survey was conducted between October 31st and November 27th, 2017 from 312 respondents that have been working in the construction industry for more than five years. There were four types of respondents participating in the survey including contractors, distributors, equipment rental companies and manufacturers. Annual revenues varied from $1M to $100M with most 25% or more of respondents falling in the $100M or more and 29% in the $5M t0 $50M category.
- Industry Risks – Survey respondents were asked to identify which factors present the most concern/risk for their business in 2018. 35% of respondents indicated political and regulatory uncertainty, 15% indicated national economic uncertainty, 9% indicated rising material costs, 9% indicated rising interest rates and 4% indicated new emissions standards.
- Top Cost Concerns – The survey asked contractor respondents to rank the top three cost concerns for their business in 2018. 31% indicated employee wages and other benefits, 18% indicated healthcare costs, 17% were concerned about taxes and 12% about material costs. It asked the same question to distributors and 20% indicated equipment costs, 20% said equipment rental cost and 19% said employee wages and other benefits.
• Net Profit Performance – An important question asked in the survey was whether participating companies expected to see an increase in net profits. According to the survey, 49% of respondents indicated they expected a “moderate” increase while 15% expected an “increase” for a total of 61% of respondents. This represents a 4% increase over 2017 when only 57% expected to experience an increase in net profits.
- New Construction Equipment Sales – The survey asked distributors to project whether there will be an increase in new construction equipment sales this year. 76% of total distributor respondents indicated they expected to see an increase in equipment sales while 21% expected sales demand to remain the same. This represents an 11% increase in the number of respondents that expect sales to increase. Only 3% of respondents believe that new equipment sales will decrease in 2018 which is a dramatic reduction of 13% from 2017.
- Construction Demands – The survey asked respondents to rate the type of construction which is most likely to grow in 2018. 63% of respondents indicated they believe nonresidential construction work will increase while 33% expect it to remain the same. This represents an 8% increase in the number of companies that expect growth and a 6% decline in the number of companies that expect growth to remain the same. Only 4% of respondents thought there would be a reduction in these construction projects which is down 2% from 2017.
Although interest rates are rising it appears that industry companies are quite optimistic about the state of the industry for 2018 and beyond. If you have questions about the survey findings presented above or need assistance with a construction tax or audit issue, Hanson & Co. can help. For additional information please call us at (303) 388-1010 or click here to contact us. We look forward to speaking with you soon.