Here we go, another new year. 2016 will be an interesting one! There is good reason for optimism and most contractors see another decent year on the horizon.
Elections
Presidential election years add drama. This one for sure. Between all the Hillary and Trump stuff we’ll certainly be hearing about it all on the news every night. The outcome has the potential for big effects in the economy in 2017. Just have to wait and see.
Economy
Looks like another year similar to the past three. Slow but steady growth. Nobody is talking about a recession this year. Many expect a slight recession or slowdown in the next year or two just because “we’re due” for a normal cycle.
The construction trades are a mixed bag. Nonresidential construction dipped this fall. In fact it dropped 26.1% in September! But Dodge is saying the Momentum Index is picking up steam, which forecasts more nonresidential construction in the near term future.
The Architecture Billing Index is above 50 again (52.7), which mean growing construction activity. However, we in the Midwest are down from 56.1 to 54.2. Still in growth territory so not a harbinger of bad times for us.
While Single-Family homes are up 12% nationally, we are down 12.2% in the Midwest. Some are saying our inclement weather the 1st quarter and June-July period threw us behind. By far the West is seeing the biggest increases. The national Association of Home Builders expects Single-Family to continue at an 11% national growth rate.
Existing home sales are doing well at 8.8% increase nationwide. Here in the Midwest existing home sales grew 2.3%.
New home sales grew 2% nationally and declined -8.3% in the Midwest. Kind of goes along with the new home starts decline.
The Contractors Confidence Index is at a strong 67.3. Which simply indicates how contractors “feel” about the future. Those feelings are influenced by the work they are lining up and bidding activity. A decent sign construction growth will continue.
Interest rates are expected to creep up a tad. However, other than psychological effects such increases will have little real impact on economic growth.
Weather
NOAH forecasted in June that our area would be drier and warmer than normal starting mid-August. Well they hit that one dead on. Everyone enjoyed the extra work days!
Contractors have told me their bidding activity was through the roof, well above a normal fall season. Most say they have a good queue of jobs lined up for the spring and will work all winter as weather allows.
Good news is NOAH is predicting warmer and drier weather for our region extending well into the summer. I hope they are right!!! Always love a mild winter and early spring start-up.
Commodity Prices
Our industry sees material and operating expenses go up when certain commodities increase.
Two biggies are oil and copper. You’ve seen the gas prices lately. The declines definitely help bottom lines! Oil is not expected to increase much for many months. We should see the current gas prices hang out for a while.
Copper prices have been decreasing since the summer. Pricing is affected by seasonal demand so expect prices to rise again in the spring. But nobody is seeing any spikes coming down the road.
Looks like a year of fairly consistent material pricing.
Contractor Pricing
There are definite increases in the street pricing happening. Contractors everywhere trialed price increases last year and found customers hardly noticed. More increases are coming as contractors attempt to regain lost ground from the steady increases in operational costs. Now is the time to bump your pricing factors.
Landscape Products
Tech is the keyword. Irrigation and lighting both have a long list of new tech based products.
For irrigation it’s control systems. In particular internet based central or remote operations an reporting.
For lighting it’s the transformers. LED continues to takeover from incandescent and that transformation is nearly complete.  But transformers haven’t changed much in the past 20 years! Well now they are. You will see several new offering that include control options not really available before. Interesting times for sure.
One suggestion, please do due diligence before jumping on new products. Not to be cruel, but there are a lot of new small companies offering some really cool stuff. But you have to be careful to pick new items that will be around an do the job.
Have a great season!!
There have been a lot of new things for landscaping that I can see people doing a lot of landscaping for the next spring and summer. I know for sure that I will be doing a lot of landscaping this year. I will have finally finished the yard and have it look just the way I want it to.