Optimism Quotient
Findings from the nationwide survey of construction executives are in
According to the forecast, construction activity is expected to hold strong for the next year in spite of uncertainty commonly seen in election years.
The Optimism Quotient is the primary benchmark for measuring contractor and distributor sentiment for local nonresidential construction activity in the coming year. At 99, it indicates a year of cautious optimism.
More than numbers, hear the implications for the construction industry in 2020. You can scroll the side bar to find short video clips most relevant to Distributors or Contractors.
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This is the 44th year of the Construction Industry Forecast and its benchmark survey. The purpose is to measure the degree of optimism in the nonresidential construction business for the coming year. In 2019, the optimism quotient reached a strongly optimistic calibration of 122, a dip from the 20 year high of 133 in 2018. Once again, we surveyed hundreds of industry professionals from equipment distributors to contractors and rental suppliers to arrive at this year’s number. And, the optimism quotient for 2020 is 99. Now, please welcome Jim Heron, National Sales Manager for Wells Fargo Equipment Finance for an executive summary of the key findings and important trends for 2020.
Customers tell us the findings from our Wells Fargo Construction Industry Forecast can help inform their buying, renting, hiring, and business planning decisions for the upcoming year. So, let’s talk for a minute about this year’s optimism quotient. At 99, it falls one point shy of 100, 100 being the baseline measure for strong optimism. The past two years saw industry executives feeling very strong about expansion, and the forecast proved true. On the optimism scale, the area you see here between 75 and 99 indicates cautious optimism. So, for 2020, the industry is straddling that line of cautious optimism and strong optimism. Let me point out that in 2016, also a presidential election year, we saw a slip in the degree of optimism. So, this small slide into cautious optimism is not surprising. Now, let’s look at a few key findings from this year’s survey and how contractors and distributors nationwide are feeling about coming activity in their industry.
2020 Construction Industry Forecast, top cost concerns. First, let’s take a look at contractors and how they’re feeling. The ability to hire qualified workers remains the main cost concern. At 54%, it weighs heavily on their minds. Employee wages are not nearly as pressing at 13%, and equipment purchase costs came in at 8%. We should note that 4% contractors indicate healthcare costs are not a major cost concern of theirs. Now, let’s look at distributors and their top cost concerns. For 2020, distributors are not so highly focused on one concern. Equipment costs, equipment rental costs, employee wages, and healthcare costs all land within five percentage points with equipment costs as the top cost concern. Following a spike of 23% last year, distributors’ concern for finance cost has dropped significantly to just 7% for 2020. We asked contractors and distributors to rank their top three risks for 2020. This was their collective response. The uncertainly with politics and its effect on regulatory decisions was first and foremost at 35%. Availability of qualified workers continues to be a top risk in 2020 at 25% and economic uncertainty was third at 21%. Matters of uncertainty around politics and the economy have risen before in our past surveys, especially during U.S. presidential election years. The ability to find qualified workers at 25% could also be seen as a contributing factor to the industry’s cautious optimism for 2020. We also asked construction industry professionals to what degree the ability to hire talented workers impacted their business in 2019. A total of 87% said that factor had somewhat of an impact or a great deal of impact on their business. In 2020, it figures to stay a top industry risk.
That wraps up the executive summary for 2020. I hope you found the information both useful and of value. I invite you to download the full 2020 construction industry forecast from our website, or you can ask for a printed booklet to be sent to you. As always, the team at Wells Fargo Equipment Finance is here to advise you with customized service and deep experience in the industry. For creative financial solutions to help get your projects done, we are here to help. Thank you for watching.
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Wells Fargo
Download your full report at http://www.wellsfargo.com/constructionforecast
© 2020 Wells Fargo Bank, N.A. All rights reserved. All transactions are subject to credit approval. Some
restrictions may apply. Wells Fargo Equipment Finance is the trade name for certain equipment leasing and finance
businesses of Wells Fargo Bank, N.A. and its subsidiaries. Equipment financing transactions are provided in Canada
by Wells Fargo Equipment Finance Company.
2020 Construction Industry Forecast new equipment purchase. Contractors. We surveyed contractors and asked, “Do you think your purchase of new construction equipment this year compared to last year will increase, decrease, or remain the same?” The answer from contractors was increase 33%, decrease 22%, remain the same 40%.
Wells Fargo
Download your full report at http://www.wellsfargo.com/constructionforecast
© 2020 Wells Fargo Bank, N.A. All rights reserved. All transactions are subject to credit approval. Some
restrictions may apply. Wells Fargo Equipment Finance is the trade name for certain equipment leasing and finance
businesses of Wells Fargo Bank, N.A. and its subsidiaries. Equipment financing transactions are provided in Canada
by Wells Fargo Equipment Finance Company.
2020 Construction Industry Forecast used equipment purchase. Contractors. We surveyed contractors and asked, “Do you think your purchases of used construction equipment this year compared to last year will increase, decrease, or remain the same?” The answer from contractors was increase 19%, decrease also 19%, and at 52%, most contractors believe purchases of used equipment will remain the same.
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Wells Fargo
Download your full report at http://www.wellsfargo.com/constructionforecast
© 2020 Wells Fargo Bank, N.A. All rights reserved. All transactions are subject to credit approval. Some
restrictions may apply. Wells Fargo Equipment Finance is the trade name for certain equipment leasing and finance
businesses of Wells Fargo Bank, N.A. and its subsidiaries. Equipment financing transactions are provided in Canada
by Wells Fargo Equipment Finance Company.
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2020 Construction Industry Forecast new equipment sales. Distributors. We surveyed distributors and asked, “Do you think your sales of new construction equipment this year compared to last year will increase, decrease, or remain the same?” The answer from distributors increase 40%, decrease 29%, remain the same 32%. Worth noting, distributors believe that there will be a decrease in new equipment sales for 2020 represents a significant rise of 21 percentage points from last year. However, consistent with 2019, a stronger backlog of jobs is a key factor that would encourage the sales of new equipment.
[ Music ]
Wells Fargo
Download your full report at http://www.wellsfargo.com/constructionforecast
© 2020 Wells Fargo Bank, N.A. All rights reserved. All transactions are subject to credit approval. Some
restrictions may apply. Wells Fargo Equipment Finance is the trade name for certain equipment leasing and finance
businesses of Wells Fargo Bank, N.A. and its subsidiaries. Equipment financing transactions are provided in Canada
by Wells Fargo Equipment Finance Company.
2020 Construction Industry Forecast impact of weather. We all know you can’t control the weather, but can you work around it? For the 2020 survey, we asked, “What impact did weather have on construction business in 2019?” Over 60% of respondents said weather was a factor, good and bad. Here are some comments that industry professionals shared.
A long winter and a very rainy spring caused for a very slow start to the construction season.
Bad weather actually helped us with our business. Trees down, cleanup work, heavy snow.
Rain through June delayed many projects, and with the lack of qualified staff, contractors couldn’t make up the lost time.
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Wells Fargo
Download your full report at http://www.wellsfargo.com/constructionforecast
© 2020 Wells Fargo Bank, N.A. All rights reserved. All transactions are subject to credit approval. Some
restrictions may apply. Wells Fargo Equipment Finance is the trade name for certain equipment leasing and finance
businesses of Wells Fargo Bank, N.A. and its subsidiaries. Equipment financing transactions are provided in Canada
by Wells Fargo Equipment Finance Company.
In 2019, the Optimism Quotient reached a highly optimistic score of 122. For 2020, the rating has landed at 99. Worth noting, the baseline for cautious optimism is 75 with anything above 100 considered highly optimistic.
Also, an OQ score of 99 is on par with past presidential election years. It shows caution ahead due to political and regulatory uncertainty.
Wells Fargo Equipment Finance
We provide businesses nationwide with competitive fixed- and floating-rate loans and leases that cover a full range of commercial equipment, floor planning, and inventory financing. We have industry financing specialists dedicated to construction, energy, commercial and specialty vehicles, marine, rail, aircraft, and vendor financing programs.
We offer a broad range of direct and vendor finance programs for equipment end-users, distributors, and manufacturers in the United States and Canada. Wells Fargo Equipment Finance is a leading bank-affiliated equipment leasing and finance provider in the U.S. and Canada, with more than $46 billion in assets under management, more than 300,000 customers, and 2,500 team members.1
Construction equipment financing
We have deep experience in the construction industry and offer tailored financing and leasing solutions. Our nationwide coverage allows us to connect our customers with the correct products to help meet their financial needs and WFEF offers complete, flexible financial solutions for the entire industry. With end-user leases and loans, dealer retail referral programs, dealer rental fleet and floorplan financing, and manufacturer subsidized retail and inventory programs, we have products suited to your particular needs.
To learn more, call 1-866-726-4714 or visit Wells Fargo Equipment Finance.
- Company data as of February 2020.
For more information and assistance, please contact your local representative.
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See past survey results.
Forecast 2019
Forecast 2018
Forecast 2017
