Earlier this week I attended the AGC of Middle Tennessee’s membership lunch.  Everything was right on!   I love chicken … they served chicken!  I have 5 kids … the guy next to me had 9 kids!  And I like to follow construction industry trends … and the speaker loves to follow construction industry trends.

David Wells, a senior equity analyst for Thompson Research Group, spoke about the 2010 economic outlook for the construction industry.  Some key talking points:

  • There is no longer a drag on residential construction and we may see some improvement in the upcoming year
  • As to non-residential or commercial construction, we have not yet bottomed out … which may occur mid-late 2010
  • Finally, as you can expect, public construction is "the only game in town"

Given the increased investment in public construction, there remains some challenges in this arena.  For example, U.S. government (and other public) borrowing has replaced private borrowing.  This creates a public debt crisis at the federal level, resulting in federal deficit projections of unparalleled amounts.  At the state level, the budget crises stem from the same economic conditions coupled with the requirement to maintain a balanced budget.

This may be new information to some of you.  It is probably old news to many others.  But what does it mean practically?  Here are some of David’s concluding recommendations:

  1. Take cost cuts now, if necessary.  The uncertainty of work significantly impacts employee productivity.  If you are going to need to make cuts, make them now, and reassure your remaining team that they are part of the team.
  2. De-lever your balance sheets.  Use the time now to analyze your debt structures in place and attempt to de-leverage your company as much as possible.
  3. Watch out for opportunities.  Weaker companies will be looking for solutions to their problems.  Stronger companies should be on the watch for opportunities to build and expand through acquisition or partnership.

Question: Any recommendations for improving your 2010 economic outlook?

Graph: Council on Foreign Relations