Staff Report
Published April 5, 2011

The Construction Barometer's 2.2% fall in the fourth quarter was mainly due to fears of construction inflation likely arising from food and energy price increases, according to data released by Carolinas AGC released today.

Business is likely to remain slow for the majority of 2011, rise moderately toward year-end, and accelerate more briskly in 2012, the group reported. Construction employment will likely remain flat throughout 2011.

Contractors in North Carolina are more pessimistic than those in the Palmetto State, with the barometer dropping 2.7% and 1.2% in those states, respectively. The barometer was the worst in eastern North Carolina, where it dropped 4.3%.

“Usually, South Carolina tends to exhibit greater barometer volatility over time; year-end 2010 numbers were the opposite. Both states showed stable construction volume, rising concern over construction-related inflation, and growing dissatisfaction with the quality of available skilled labor. In North Carolina though, there were greater concerns over rising labor, materials, and equipment costs; financing heavy equipment; tighter labor conditions with higher wage and benefit costs; and reduced spending on highway, utility and general public works projects,” the AGC’s report stated.

The Upstate’s barometer dropped just 1.1% as contractors reported significantly better business conditions at the end of 2010 than in previous quarters, even while experiencing rising labor, materials and equipment costs. Ultimately the fear of expected inflation in the industry nudged the Barometer score down for the Upstate region, AGC said. On the financing front, panelists reported no change in the availability of either short- or long-term credit but somewhat lower borrowing rates, and little change in banker attitudes toward new borrowing requests anticipated for the first half of 2011. However, they also foresaw rising borrowing costs and tighter credit market conditions later in the year.

In the Lowcountry, the barometer dropped 1.5%. Contractors there reported a slight drop in business activity but significantly stronger demand for skilled labor, stable wage rates and a smaller rate of equipment and materials cost inflation than elsewhere in the Carolinas. Similar to the Upstate region, Lowcountry contractors are growing increasingly fearful of significant construction cost inflation down the road. Lowcountry contractors also reported a significant drop in availability of both short- and long-term financing, rising interest rates on all sorts of commercial credit, and growing concern that interest rates will continue moving upward throughout 2011.

With 2,200 members, Carolinas AGC supports efforts in workforce development, business development, profit management, and workers' compensation insurance.