According to a new construction industry report and forecast published by Wells Fargo’s National Sales manager John Crum, 2018 is looking to become one of, if not the best year for construction equipment sales in United States history! The Optimism Quotient (OQ) is a survey used to benchmark contractor and equipment distributor sentiment on local nonresidential construction activity. This year (2018) has scored 133 a 10-point increase over 2017. Both residential and non-residential construction industry activity have shown an increase in optimism stemming from a high level of approval of the current tax reform.
An OQ score of 100 or more represents a very strong optimism for increased local construction activity relative to the level of activity in the prior calendar year. A score of 75 to 99 represents a more cautious outlook for the industry and below 75 signals a belief that the industry will decrease. According to Crum “This is the highest optimism we have recorded in the last 20 years so that in and of itself is really good news” The information provided by these reports is often used by equipment retailers to assess the health of the market and forecast potential sales.
“This is the highest optimism we have recorded in the last 20 years so that in and of itself is really good news”
2017 was a very good year for construction equipment sales, and according to the construction industry outlook, it appears that 2018 will see further improvements and sales. The belief is that more than 76% of equipment distributors will see an increase in sales. Another effect this outlook has on the construction industry is that distributors expect a 55% percent increase in their rental fleets while only 7% said they will decrease their size, leading to more equipment sales and a general increase in market contribution.
While the data recorded above points to a very positive outlook for the Construction industry, finding and paying skilled labor remains the highest concern that may have a potential impact on net profits. For contractors, employee wages and other benefits (31%) and healthcare costs (18%) were the top of cost concerns. Distributors concerns over equipment costs (20%) and equipment rental costs (20%) remained the highest ranked. 50% of respondents said they were aware of pending changes to the accounting rules for leasing. Of the respondents that were aware 50% believe that these changes will greatly impact net profits, while 20% feel that there will be no impact at all.
“While the data recorded above points to a very positive outlook for the Construction industry, finding and paying skilled labor remains the highest concern that may have a potential impact on net profits.”
With the expected increase in equipment sales oil and lubricant suppliers have also taken precaution, increasing their stores while the cost of raw materials continues to rise. While not measured in the OQ report, the cost of fuel is always a factor in the estimation of net profit. Suppliers should anticipate a higher demand in energy and lubricant products to meet the growth in sales in the construction industry.
Will this projected growth in equipment and construction affect your company or you? What are your expectations from this forecast? Let us know below in the comments and consider subscribing for more news and information on construction, and many other industries.
The SC Fuels TeamKeep in touch!