IPA SBRB STUDY: Construction/Contractor Industry Confidence Falls Nearly 40%

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Cost of materials continues as leading issue; energy & fuel leaps to second greatest concern.

Construction and contractor industry confidence in the economy has dropped by nearly 40% in the past three months, according to the results of an International Profit Associates Small Business Research Board (IPA SBRB) survey released here today.

The IPA SBRB Construction / Contractor Confidence Index fell to 30.7 for the most recent poll completed earlier this month, down from an index of 49.3 in May. By contrast, this outlook was far more pessimistic than that of all small businesses for which the IPA SBRB Small Business Confidence Index (SBCI) dropped about 20% to 39.3 from 47.3 during the same three-month period.

According to the results of the newly issued survey, 26% said they had confidence in the general economy versus 48% in May. Concurrently, 38% of the respondents in the current poll indicated disappointment with the direction of the economy an increase of 11% from the 27% who expressed that opinion in May.

Nevertheless, 52% of the construction and contracting firms responding to the survey said that they are estimating revenues for the year will be about the same as last year while 40% said they would be better than their 2005 performance.

Of the respondents, 49% said they intend to maintain current workforce levels while 26% said they intend to increase hiring with 14% decreasing hiring and 9% of the construction and contracting firms unsure of their plans.

“The precipitous drop in confidence among the construction and contracting trades mirrors the concern we have heard from developers and builders about the slowdown in housing purchases and softness in commitments for new commercial projects,” said Gregg Steinberg, President of International Profit Associates, the largest privately-held provider of management consulting and professional services to small and medium-size businesses in North America.

”This data is alarming, though, both in how quickly the confidence among owners and managers of construction and contracting firms has changed as well as the steepness of the decline,” Steinberg added. “The confidence of construction and contracting firms, which had greater confidence than the universe of all small businesses just three months ago, has dropped by twice as much.”

The cost of materials, energy and fuel costs, and taxes are listed by the respondents as their three leading business issues. The cost of materials was described by 25% of the participants as the leading concern (the same as the previous period), 15% named energy and fuel as a leading issue -- an increase from 3% of the respondents in the May 2006 report. Taxes were listed by 14% as the leading issue.

As far as other areas of interest, construction and contracting firms had varied opinions about being prepared to handle emergencies, whether the minimum wage should be raised and the fate of the estate tax -- all of which were similar to the universe of all small to medium-size businesses.

Of the construction and contracting firms, 27% said they have a disaster or emergency plan ready, an increase of 15% from the post 2005 hurricane season. Significantly, 72% still do not have a plan in place (only 1% better than the 73% of all small businesses that do not have such a plan).

Construction and contracting firms are split about the minimum wage, with 49% in favor of it being raised, 28% opposing it and 23% not certain.

The view on estate taxes are mixed as well with 40% opting for them remaining as they are, 31% abolishing them, 14% looking for a “change” and 15% unsure.

The International Profit Associates Small Business Research Board ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations.

The IPA SBRB research includes studies of specific industry segments, such as Construction & Contracting and Manufacturing. The IPA Small Business Research Board will continue to expand upon the base of industries it tracks.

Participants in IPA SBRB polls provide feedback on significant issues and allow for real-time insight into the state of small businesses nationwide. The universe of participants is developed from among small businesses across the United States. IPA SBRB studies are voluntary surveys conducted via phone and email. Polls are structured and supervised through an independent resource.

The latest information about the IPA Small Business Research Board can be found at http://www.ipasbrb.com.

International Profit Associates, Inc. (IPA) is the largest privately held provider of management consulting services to small and medium-sized businesses in North America. IPA and its more than 1,800 professionals offer a wide range of proven and innovative methodologies to help businesses grow and prosper regardless of the economic cycle. IPA either provides directly or through its affiliated companies a comprehensive array of business advisory services, tax and estate planning services or merger, acquisition and other financial advisory services in the United States and Canada. More information about IPA can be found at http://www.ipa-iba.com.

Note to editors: Survey results follow

IPA SBRB Construction & Contracting Industry

Summer 2006 Survey (results in percentages)

General economy                    

Better 26

Worse 38

No Change 34

Revenue expectations

Expect increase of 10% or more:    22

Expect increase of less than 10%: 18

Expect revenue will be about the same: 52

Expect decrease of less than 10%: 3

Expect decrease of 10% or more: 5

Hiring

Increase hiring: 26

Decrease work force: 14

Remain the same: 49

Unsure: 9

Single issue

Interest rates: 5

Healthcare costs: 6

Taxes: 14

Cost of materials: 25

Economic conditions: 9

Foreign competition: 5

Government regulation: 3

Finding quality employees: 12

Ability to obtain capital: 0

Energy/Fuel Costs: 15

Other: 5

Developed and/or instituted an emergency disaster plan since hurricanes

Yes: 15

No: 72

Already had one in place last year: 12

Raise minimum wage

Yes: 49

No: 28

Don’t know/no opinion: 23

Estate tax

Abolish: 31

Change: 14

Remain same: 40

Don’t know/no opinion: 15

Copyright 2006 International Profit Associates Small Business Research Board (IPA SBRB). The International Profit Associates Small Business Research Board ascertains and reports the opinions of small business owners and managers on a wide variety of topics related to their own businesses as well as national and international issues that may impact their operations. The information may be reprinted or quoted from with attribution.

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Raymond Minkus
MINKUS & PEARLMAN PUBLIC RELATIONS
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