Construction contractors are optimistic about 2022 as the global construction trends indicate a favorable economic outlook for the industry. Even though contractors are facing supply chain and labor issues, they are still expecting an increase in demand for different projects. They are optimistic that the biggest challenge that they will be facing this year will be to keep up with the increasing demand for projects.
Associated General Contractors of America
As per surveys conducted by the Associated General Contractors (AGC) recently, contractors and distributors are hopeful as they are expecting to see an increase in equipment sales as well as an increase in profits. The past couple of years were unstable for the industry due to6 the pandemic. With the current trends, however, it is the general consensus that 2022 should be a strong year for the construction industry. The chief economist of AGC, Ken Simonson, is also of the same opinion.
As per the chief economist of the Associated Builders and Contractors (ABC), Anirban Basu, construction firms across the United States should expect to stay busy in general. Basu also commented about his surprise at the expectations of an increase in profit margins in the next few months expressed by contractors in the surveys conducted by ABC. With the increase in labor prices, this implies that contractors are intending to quote prices that cover more than the cost of construction service delivery to project owners. Anyone looking in from the outside would think that the construction industry is ecstatic going into 2022, but perhaps that is not the case.
Supply Chain Crisis
Despite the aforementioned optimism of contractors, Basu highlights that the economy is still unbalanced and the supply cannot meet the demand. With the broken supply chain, it is no surprise that transportation costs are through the roof. Since there are limited ships and truck drivers available, manufacturers are not able to get their products to the market. Because of this delay in bringing new equipment to the market, we see that the prices of both new and used equipment are increasing.
The inflation in the cost of new equipment is ultimately a result of the supply chain disruptions. According to reports from dealers, they are not able to sell as much equipment as they would like to due to the short supply. According to the reports that Wells Fargo is getting, equipment dealers are expecting the supply chain issues to be resolved by the second and third quarter of the year, so they would have more equipment to sell at that time. According to the survey, 60% of distributors are of the opinion that their sales of used equipment will also see an increase.
These supp6ly chain issues and increase in prices make it hard for dealers to maintain their inventory. The supply chain disruptions and a lack of skilled workers are the two biggest concerns that the construction industry is facing right now. Construction executives are, however, seeing an opportunity for improvement in the near future. With the enactment of the infrastructure law and historically low interest rates, it is expected that the overall economy will see an improvement.