January 2015

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>> COVER STORY U.S. BUSINESS OUTLOOK REPORT JOANNE COSTIN O ne only has to examine where we are versus the prior peak to realize just how painstakingly slow the construction market recovery has been. Spending on single-family home construction has yet to even hit half of its $434 billion spending peak. Nonresidential construction activity totaled $377 billion through three quarters of 2014, a far cry away from its peak of $501 billion. Similarly, according to AGC data, only three states have hit peak construc- tion employment: Louisiana, Oklahoma and North Dakota. In the U.S. as a whole, construction employment is 21 percent below the peak, compared to the overall U.S. economy, which has been posting record employment numbers. 2014 – Year in Review AED dealers have taken a slow and steady path to recovery as well. Our annual forecast survey revealed that activity was strong enough in 2014 to bring increased revenues to more than seven of 10 dealers – compared to just 10 percent who experienced lower revenues. Gross margins were up for 55 percent of dealers surveyed, compared to 24 percent who experienced declining margins. ree quarters of the dealers surveyed said their year-end results would be on target with projections made this time last year. Dealers cited surface infrastructure (roads/bridges), housing and commer- cial building as their leading sources of revenues in 2014. While surface infrastructure remained challenged for much of 2014, gains in housing (+ 20%) and commercial/industrial building (+13.1%) were likely the key contribu- tors to revenue gains. "What we are seeing is general contractors are back to work, and we're getting a lot of business from that, both rentals and sales," said Gayle Humphries, chief financial officer, JCB of Georgia, based in Savannah. "Everywhere you go they are building something." CMD Group (formerly Reed Construction Data) Chef Economist Alex Carrick believes the U.S. economy is currently being driven by an energy sector boom, growth in technology and manufacturing. "Nine of the 10 best labor markets have either energy or technology as big components of their economy," said Carrick in a Nov. 20 CMD webinar, which provided insight from three key industry economists. Four of the top markets are in Texas. One example of how the oil market is driving both commercial and resi- dential construction is in Baytown, Texas, where ExxonMobile Chemical Company is building a multibillion dollar ethane cracker. According to one dealer surveyed, residential housing is under construction in anticipation of the arrival of new people to the region. Since 2011, Texas population has grown 1.49 percent. Colorado and Oklahoma are two addi- tional states where dealers have benefited Construction Recovery May Finally Gain Steam in 2015 Rising activity in housing, commercial construction and oil & gas may speed the pace. 44 | www.cedmag.com | Construction Equipment Distribution | January 2015 "Nine of the 10 best labor markets have either energy or technology as big components of their economy," Construction Recovery for This Cycle Has Been Painfully Slow for Most Sectors $434 $53 $328 $501 $105 $15 $276 $337 $193 $43 $314 $377 $0 $100 $200 $300 $400 $500 $600 S-F construction MF construction Home improvements Nonres bldg. construction Peak Trough 2014(p) Note; 2014 estimated through first three quarters; home improvement spending estimated from JCHS LIRA; Source: JCHS and U.S. Census Bureau Construction Spending Put-in-Place Spending at various points in the past construction cycle ($Billions) 64 #CMDInfo

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