Southwire Construction Economy

Are the clouds parting or gathering?

Will Rogers once said, “An economist’s guess is liable to be as good as anybody else’s.”  Unfortunately, when we look at the broader economic trends that are impacting the residential and commercial construction industry this year, in a lot of ways it seems like we really are guessing.

In today’s world, the global economic variables that can come in to play are staggering.  However, whenever you have to make decisions that have risk or doubt in them it’s best to start with what you know.

So, what do we know about the U.S. market?

It is generally agreed that two main factors are holding construction down: fear and unemployment.  A lot of the fear is economic driven – so, even the fear is unemployment related.  The million dollar question is: will more people get back to work in 2012?

Back in January, Joseph Kelly wrote about Beth Ann Bovino’s commentary from McGraw-Hill Construction’s Outlook 2012 Executive Conference. Bovino is the Deputy Chief Economist at Standard & Poors.  Bovino cited unemployment as a key factor that held the U.S. economy’s growth to 3 percent in 2010, an estimated 1.7 percent in 2011 and was projected to hold growth of 1.5 percent in 2012.  Bovino said that the 25 million un- or underemployed Americans equated to a weak jobs market and “a weak jobs market means less construction.”

Consumers are spending less and banking more.  One of the bright spots is in renovations.  Kelly writes, “Instead of moving to larger residences, homeowners are improving the ones in which they reside, waiting for market prices to improve.”  Another, bright spot especially for electrical contractors is energy efficiency upgrades. We’re seeing significant and promising growth in the utility and renewables markets, which we’ll discuss in a future post.

The general consensus is that while unfortunately it’s likely to be another rough year in the U.S. market, there are opportunities and strategies to mitigate larger economic issues.  When growth is slow it’s crucial to optimize your operation.  There is a business concept that says every dollar that you don’t spend is worth two that make.  The logic is that it takes money to make money – while saving money has no cost.  Simply put… work smarter.  One of the ongoing themes of this blog will be to examine ways that contractors can simply operations and work more effectively. Ways to work smarter, so that they maximize the profit in every job.

Kelly’s article is a must, although sobering, read and comprehensively covers the state of the industry.  It’s available on the Electrical Contractor web site here.  Do you agree with his assessments?  Are you seeing the same or something different?  How has 2012 been going for your business?

– Rhonda Gauthreaux

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