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Report: Firms Optimistic about Private-Sector Construction Markets

The trend for construction markets is positive, with the exception of the public sector.

Construction firms who plan to add new staff this year outnumber those who plan to cut staff by 3 to 1, according to a survey from the Associated General Contractors of America and Computer Guidance Corp. as part of the association's report, The 2013 Construction Industry Hiring and Business Outlook.

The survey, with responses from more than 1,300 construction firms, provides a generally optimistic outlook for the year even as firms worry about rising costs and declining public sector demand.

Survey results show that 31 percent of firms plan to add staff this year, while only 9 percent plan to make layoffs, which may be a reflection of increasing optimism around private-sector demand in key markets. Thirty-six percent predict hospital and higher education construction spending will grow, and contractors were also optimistic about power facilities construction.

Meanwhile, contractors expect demand for many types of public construction to decline in 2013. Forty percent of contractors report they expect demand for public buildings to shrink in 2013. Thirty-seven percent expect demand for K-12 school construction to shrink, and 35 percent expect the market for manufacturing facilities will also contract.

Adding to contractors' concerns, Simonson says “materials prices and health care costs continue to rise and many firms are reluctant to make major investments in new equipment.”

The recent study echoes economist Andrew Duguay's recent assessment. In the MDM Webcast 2013 Economic Outlook, the senior economist for the Institute for Trend Research said he sees “no upside in sight” when it comes to federal construction spending, but sees increasing strength in the private sector. Duguay also sees strength in the power facilities sector, and says residential construction has seen even greater growth.

Like the study, Duguay noted businesses' hesitancy to make large investments. That hesitancy is evidenced by what Duguay says is slower growth in the electrical, computer equipment, machinery and furniture sectors of wholesale trade. He expects, though, that some of this pent-up demand should release following the "fiscal cliff hump."

For more information on strengths and weaknesses in construction markets, watch Duguay's 2013 Economic Outlook and access the recent The 2013 Construction Industry Hiring and Business Outlook.

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