NAHB, CIT surveys show optimism among contractors

December 18, 2003
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Homebuilders' expectations for sales in the next six months dropped for the second straight month in December, according to a report this afternoon from the National Assn. of Home Builders (NAHB). The expectations index slipped to a still-high 76 from 81 (originally reported as 79) in November and 82 in October. Nevertheless, a rebound in the index for traffic of prospective buyers, combined with continued strength in the index gauging current sales activity, kept the overall Housing Market Index unchanged at 70.

Separately, NAHB reported that its third-quarter Remodeling Market Index showed that a sub-index of current market conditions rose 3.7 points from a year before to 53.5, while the sub-index of remodelers' expectations for the near future rose 6.7 points to 54.9. Both sub-indexes were nearly level with the second-quarter readings.

The CIT Construction Industry Forecast, a telephone survey of more than 900 contractors and equipment distributors released by CIT Equipment Finance (www.cit.com) on Wednesday, found “U.S. construction industry leaders are significantly more positive about the industry's prospects than at any time since 1999.

[According to] Roy Keller, President, CIT Equipment Finance, 'The overall year-over-year growth in optimism was the most impressive in the 28-year history of the Forecast as sentiment significantly rebounded from last year's levels…' Industry-wide, executives are slightly more positive about their financial prospects than they were in 2003….For the second consecutive year, the rising cost of insurance was the top issue on the minds of construction industry executives….Contractors continue to take a conservative approach to investing in new or used equipment. Roughly 44% of contractors surveyed said they will purchase equipment in 2004 vs. 49% in 2003. Just half of these contractors indicated that they will purchase new equipment. 23% plan to purchase only used equipment (21% in 2003)….The number of builders naming residential construction as the industry's single best opportunity has increased consistently in each of the past six years. 64% of builders said residential construction was their top opportunity (62% last year and 32% in 2002) vs. only 16% of builders who said nonresidential construction was their top opportunity.”

The producer price index (PPI) for finished goods, seasonally adjusted, dropped 0.3% in November following five monthly increases, the Bureau of Labor Statistics (BLS) reported Friday. The 12-month change was 3.4%, about the same as the 12-month change for the previous three months.

The index for construction machinery and equipment dipped 0.1% for the month and was up 1.2% from November 2002. Among intermediate-goods indexes, BLS noted, “Prices for materials and components for construction increased 0.5% in November, after rising 0.3% in October. Softwood lumber prices gained 1.3%, following a 1.9% decrease in the preceding month. Indexes for gypsum products and for paving mixtures and blocks also rose, after declining in October, while prices for concrete products and for nonferrous wire and cable rose more in November than they did in October.

Conversely, plywood prices decelerated-rising 1.0%, after gaining 5.4% in October. Indexes for plastic construction products and steel mill products also rose less in November, and the indexes for fabricated structural metal products and for air conditioning and refrigeration equipment turned down.”

The estimates for investment in private nonresidential structures have been recast to separate commercial and health care structures from manufacturing structures. Investment in the former dipped 0.4% from the first quarter to the second quarter but fell 7.6% from the second quarter of 2002. Investment in manufacturing structures rose 9% in the second quarter, although it was still down 22% from a year before. Investment in power and communication structures (formerly labeled utilities) fell 6% in the quarter but only 2% over the year. Gross investment in government structures rose 0.4% in the quarter and 1.6% for the year.

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