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Industry Beat Wells Fargo Releases Optimistic U.S. 2013 Forecast Modest improvement overall is expected. Construction contractors and equipment distributors are optimistic that local nonresidential construction activity will improve in 2013, according to a survey by Wells Fargo Equipment Finance, Inc., a subsidiary of Wells Fargo & Company. As part of its 2013 Construction Industry Forecast, Wells Fargo���s Construction Optimism Quotient (OQ) ��� the survey���s primary benchmark for measuring contractor and equipment distributor sentiment ��� is at 106 for 2013, marking the second consecutive year with an optimistic reading. An OQ over 100 is considered optimistic sentiment towards year-over-year improvement in local nonresidential construction activity. ���It���s great to see that contractors and equipment distributors expect nonresidential construction activity in 2013 to retain the improvements they experienced in 2012,��� said John Crum, senior vice president and national sales manager of the Construction Group at Wells Fargo Equipment Finance, Inc. ���For most parts of the country, we expect to see modest improvement in overall construction activity and contractors anticipate acquiring additional heavy equipment to support this activity.��� Highlights of the 2013 Construction Industry Forecast include the following: Construction is moving ahead. The Optimism Canadian Chamber Identifies Obstacles to Progress The Canadian Chamber of Commerce (CCC) released a report detailing the obstacles impeding Canada���s economic progress. ���Tackling the Top 10 Barriers to Competitiveness,��� identified public infrastructure planning as one of the chief barriers undermining productivity. The report bemoaned the lack of a long-term national investment strategy, warning that the cost of the crumbling infrastructure is enormous. The CCC called for greater intergovernmental cooperation, a long-term federal commitment, and policies to encourage private sector investment. Quotient ��� is a very positive 106. Although the number is down from 114 in 2012, it represents the third highest national optimism reading in the past 13 years with only 2012 and 2005 being higher. The industry expects rental fleets to continue to grow. About half of distributors (50.5%) indicated that they expect to increase the size of their rental fleet in 2013. Only 5.5 percent said they expect their rental fleet to decrease in 2013 compared to 2012. Residential could lead the way. Optimism about the residential side of construction was slightly higher than for nonresidential. More contractors expect residential activity to increase (46.7%) than to remain the same (45.5%) or decrease (7.8%). Contractors will buy new and used equipment. In 2013, 80.9 percent of contractors indicated that they anticipate buying new equipment and 80.3 percent indicated that they will buy used equipment. These numbers are down slightly from 2012. Conducted between Jan. 4 and Jan. 18, 2013, the survey includes responses from 347 construction industry executives from across the U.S. The complete report is available for download at www.wellsfargo.com. The Impact of Sequestration on Federal Construction Budgets in FY 2013 Program Highway Trust Fund (core) Highway Trust Fund (General Fund payment) FY 2013 Budget Authority $40.2 $6.2 billion (Sequesterable amount of Highway Trust Fund) Federal-aid Highways (Contract authority) Highway Emergency Relief $739 million (Sequesterable Budget reduction Exempt $316 million (no impact this year, but will reduce future year HTF balances) $38 million amount of Highway Trust Fund) $2 billion $101 million from Hurricane Sandy Bill Transit Formula Program $8.5 billion Exempt Transit Capital Programs $1.9 billion $96 million Army Corps of Engineers $2.3 billion $250 million (Construction) Airport Improvement $3.515 billion Exempt Program (Core) Airport & Airway Trust $1 million (Sequesterable amount Fund (grants-in-aid) of Airport Improvement Program) >$50,000 Automatic spending cuts known as sequestration took effect March 1, chopping billions from federal programs. While a few programs like the Highway Trust Fund and the Airport Improvement Program are largely exempt, the majority of government investment accounts will suffer cutbacks of nearly 5 percent. The table above illustrates the impact of sequestration on federal construction program budgets in FY 2013. 14 | www.cedmag.com | Construction Equipment Distribution | April 2013 14_industry beat_KP.indd 14 3/25/13 2:11 PM