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Special Reports
Construction Lending
Carolinas Construction Indicator Posts Increase
Stronger business activity.
By Jennifer Harmon
The most recent Carolinas AGC Construction Barometer again posted a gain, showing
continuing positive momentum on rising construction activity, according to the Associated General Contractors of
America.
The 0.7% rise is attributable to strengthening economic indicators released in March for the fourth quarter of
2006. Business impressions provided by the barometer's contractor panelists during the first quarter of 2007 maintained
their positive values.
In the barometer's quantitative series, the largest construction activity gains occurred in the low country of
South Carolina and western North Carolina, while activity declined somewhat in upstate South Carolina and eastern
North Carolina.
Business volume in the North Carolina heartland remained unchanged, according to the barometer. Unemployment fell
modestly due to new positions becoming available while expectations heightened for new business growth.
Qualitative indicators showed business and economic conditions advancing 1.3% and financing availability trends
rising 0.1%. While contractors reported they anticipate growing labor shortages and rising wages beginning in summer,
they anticipate more predictable and manageable rising materials prices throughout the year.
Overall, contractors reported strengthening business activity, rising expectations that 2007 will turn out to be
a better year for business than 2006, stable (or at least predictable) construction materials costs, falling construction
equipment costs, and slightly better availability of both short- and long-term credit.
In spite of strong credit availability and stable interest rates, contractors reported little need for new financing.
Interestingly, the collapse in residential construction activity observed across much of the U.S. is having virtually
no impact on lender attitudes for commercial contractor borrowing requests, indicating that lenders perceive the
downturn in construction activity to be confined entirely to the residential segment of the market.
Both North and South Carolina posted gains, but the rate of increase was significantly stronger in South Carolina,
up 1.6%, than in North Carolina, up 0.3%. The difference is found on the barometer's qualitative side, where South
Carolina contractors reported a 2.5% gain while North Carolina contractors reported a 0.9% drop.
Contractors perceived that construction conditions in North Carolina are strengthening at a slower pace than in
South Carolina. Credit market conditions appear to be taking a slightly different path.
South Carolina contractors reported a significant increase in the availability of both short- and long-term credit,
while North Carolina contractors noted very little change.
In spite of this difference, the association said lenders continue to regard new contractor borrowing requests
favorably in both states, recognizing the health and vitality of the region's construction industry.
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