Wells Fargo: Construction Industry Hopeful About 2021 Despite Optimism Dip in 2020
MAR 17, 2021 - 6:37 am
Wells Fargo’s 45th annual construction industry forecast revealed an initial decline in sector sentiment on the tail end of a complicated 2020 and renewed optimism for the second half of 2021.
In November 2020, the bank queried hundreds of industry executives to determine the 2021 U.S. National Optimism Quotient (OQ). Survey results showed leaders ended 2020 feeling cautiously optimistic, with a 2021 OQ score of 78, representing a 21-point drop from 2020.
“From a global health pandemic to civil unrest to a historical election year, it was more important than ever to survey our construction industry peers to understand their sentiment as they reflected back on the past 12 months and anticipate what 2021 might bring,” James Heron, national sales manager for Wells Fargo Equipment Finance’s construction group, said.
The OQ is the survey’s primary benchmark for measuring the degree of optimism in the nonresidential construction business for the coming year. The survey posed questions about equipment sales, purchase expectations and rental market trends while also exploring major cost and risk concerns industry executives were considering as they geared up for the new year.
At 78, the 2021 OQ indicates optimism tempered with restraint. Any score between 75 and 99 indicates more cautious or measured optimism. An OQ score of 100 or more represents strong optimism for increased local construction activity relative to the perceived level of activity for the prior calendar year. A score below 75 signals that most responding executives believe local construction activity will decrease — a more pessimistic point of view.
The 2021 score represents a significant dip compared with the 2020 OQ of 99, which was just shy of the 100 points considered strongly optimistic. Other key findings of this year’s survey include:
Pessimism for nonresidential construction activity continues to grow among executives.
While executives are becoming more pessimistic about nonresidential construction activity, their optimism for residential construction activity has strengthened.
Of executives who think that nonresidential construction activity will remain the same, most feel it will begin to increase in the year’s second half as vaccines continue to roll out.
The outlook for the construction industry as a whole remains positive, with 59% of respondents believing it will expand in the next two years.
Trends in Rentals and Purchases
Overall trends in equipment rentals and purchases among contractors remained unchanged.
More distributors reported renting out less equipment now than a year ago; however, they continue to utilize the majority of their fleet.
Top Cost Concerns
Executives expressed uncertainty about the local and national economy, political changes, and public health as it relates to COVID-19.
The percentage of respondents who expressed potential tax increase concerns rose from 4% in 2020 to 13% in 2021.
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