CIT Construction last week announced strongly optimistic results of the 30th annual CIT Construction Industry Forecast. The 2006 outlook indicates that for the third year in a row, U.S. construction industry leaders anticipate a strong year ahead, yet remain cautious.
Regionally, two of the nine U.S. regions surveyed show an increase in confidence while three additional remain optimistic. CIT Construction is one of North America’s leading providers of financial services to the construction industry.
“For the third consecutive year, the leaders of the U.S. construction industry share an optimistic outlook for the coming year,” said Ron Rieckes, executive vice president of CIR Construction. “While their optimism is more cautious than the previous year, their positive predictions for 2006, in terms of equipment rentals and purchases, net income, business strategies, technology and issues and opportunities, give hope for what’s to come.Based on the history of accuracy of the CIT Construction Industry Forecast, all of us in the construction industry can look forward to good things in 2006.”
The forecast’s overall optimism quotient fell seven points for 2006 from last year’s 109 to 102, but it continues to indicate a positive outlook for the coming year, CIT said. The optimism quotient is the forecast’s primary indicator for assessing and comparing the respondents’ level of confidence in the health of the construction industry.
According to the survey, more contractors and distributors anticipate growing their equipment reserves. Almost half (49 percent) of surveyed contractors anticipate equipment purchases (up from 44 percent in 2005) and 52 percent of distributors are planning to add to their equipment-rental inventories in 2006.
Contractors expect to spend almost $60,000 to purchase pre-owned equipment (up about 28 percent from their 2005 budget) and an average of $70,200 on new equipment, compared to $79,200 planned a year ago.
While contractors favor their own equipment, they expect to meet 16 percent of their 2006 equipment requirements with rented or leased equipment, and 17 percent expect that percentage to increase. Rented or leased equipment is expected to meet about 18 percent of builders needs and 10 percent of non-builders needs.
Large equipment rental companies are the preferred source for obtaining the required equipment, according to contractors who on average fulfill about 70 percent of their rental needs from such companies.
Just as contractors expect to rent more equipment, 58 percent of distributors anticipate an expected increase in their rental income, which is the most optimistic distributors have been since 1999 when 59 percent expected their rental income to grow.
In addition, distributors expect to meet the rental equipment demand by growing their equipment fleet. Fifty-two percent plan to expand their fleets in 2006, compared to 48 percent in 2005. Of those who expect to add to their inventory, the increases are expected to average 17 percent growth. Also, 76 percent of distributors report that they are winning business or holding their own against large national rental companies.
Now in its 30th year, the CIT Construction Industry Forecast independently surveys U.S. construction executives on their perceptions of the state of the industry and trends for the coming year. More than 900 contractors and equipment distributors were surveyed via telephone interviews across the country.
