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ABC Predicts 2012 Will Be A Slow Year for Construction

Associated Builders and Contractors (ABC) today released its 2012 economic forecast for the U.S. commercial and industrial construction industry. “ABC’s analysis of construction trends indicates 2012 will be a year of gradual progress as advances in private construction are partially offset by ongoing declines in publicly financed construction,” said ABC Chief Economist Anirban Basu.

“Nonresidential construction spending is expected to grow 2.4 percent in 2012 following a 2.4 percent decrease in 2011,” Basu said. “The pace of recovery in the nation’s nonresidential construction industry remains soft and 2012 is positioned to be a year of slow gain. The first half of 2012 may be particularly challenging, a reflection of the soft patch in economic activity experienced during much of the first half of 2011.

“ABC’s national Construction Backlog Indicator, which stood at 8.1 months for both the second and third quarters of 2011, is not expected to advance substantially and likely will remain in the vicinity of 8 months of backlog for much of 2012,” said Basu. “However, backlog is one month higher from the same time last year. A backlog of less than 8 months is associated with construction spending declines, while a backlog exceeding 8 months is statistically associated with future construction spending increases. Today’s level of backlog is consistent with flat construction spending.

“Nonresidential building construction employment is expected to increase 0.4 percent in 2012 following lackluster 0.6 percent growth in 2011,” Basu said. “Employers will continue to seek increased productivity among existing workers in order to boost weak industry margins.

“There may be a degree of relief for construction contractors with respect to materials prices.  In 2011, prices for construction inputs rose 7.5 percent,” said Basu. “ABC expects 2012 materials prices will rise 4.7 percent. Despite a sluggish construction recovery, input prices are likely to remain elevated as global investors retain significant ownership in commodities and hedge against risks emerging from Europe, the United States, China and Brazil.

“The direction of the U.S. dollar will play a major role in determining construction input prices in 2012. However, the dollar’s direction is far from obvious,” Basu said. “Although the nation continues to run a large trade deficit, which implies further deterioration in the value of the dollar over time, investors often race to dollar-denominated assets during times of global financial stress. We are in one of those times now, which could keep the dollar inflated in 2012. While this would create a more challenging environment for U.S. exporters, it would likely result in lower construction materials prices.”

Year-to-Date Performance: 2010 – 2011 and ABC’s 2012 Forecast





% Change


ABC’ s Construction Backlog Indicator (CBI)
National Index (in months)





Construction Employment (thousands, not seasonally adjusted) – U.S. Department of Labor

Nonresidential Building





Residential Building





Construction Spending – (millions, seasonally adjusted annual rate) – U.S. Census Bureau
Total Nonresidential
















Health Care




















Total – All Industries





Private Nonresidential
















Health Care




















Total – All Industries





Public  Nonresidential











Health Care















Total – All Industries





Producer Price Index – U.S Department of Labor

Inputs to Construction Industries – Index Value





Gross Domestic Product (2005 billions of dollars) – U.S Department of Commerce

Real GDP





 *= Data predictions by ABC Chief Economist

“For the most part, 2011 has been disappointing. However, recent economic news has been more positive, including data regarding the gross domestic product (GDP), business investment and exports,” Basu said. “If the U.S. economy continues to progress, eventually this will translate into more vigorous recovery in the nation’s nonresidential construction sector.

“Many prominent forecasters expect GDP to expand less than 3 percent next year. The economic recovery in the United States to date cannot sustain brisk expansion without the participation of real estate and construction activities,” Basu said. “With office vacancy rates still high, job creation still slow and lending still disciplined, 2012 is not positioned to be a year of significant progress in private investment. Public construction spending continues to decline in many communities across the United States.

“ABC anticipates ongoing improvement in the volume of privately financed construction as economic conditions gradually improve and lending institutions become more comfortable lending to deep-pocketed investors operating in stable contexts,” said Basu. “More importantly, certain leading indicators have turned the proverbial corner, including ABC’s Construction Backlog Indicator. This forward-looking measurement has shown slow but steady improvement in the commercial/institutional construction category, presently associated with a backlog of 8.4 months.

“Much of the growth in recent years has emerged from publicly financed projects, including projects related to the U.S. stimulus package passed in February 2009,” Basu said. “With the impact of stimulus-funded projects steadily declining, the U.S. nonresidential construction sector will become increasingly dependent on privately financed projects for growth.

“However, certain segments are better poised for growth than others. Leading the way in recent months has been construction related to the nation’s power industry, which ABC projects to expand 11.4 percent during the course of 2011,” said Basu. “The driving force for the United States appears to be in energy, and the growth of this economic segment has been evident in a number of states, including Texas, Oklahoma, North Dakota and Pennsylvania. ABC expects power construction to continue to lead the way with a projected 9 percent increase in spending in 2012.

“Health care represents another likely candidate for economic expansion. This is true for a number of reasons, including thawing credit markets, the nation’s demographics and health care reform, which will continue to increase the number of Americans with insurance and therefore enhance utilization,” Basu said. “Because of this, ABC projects health care construction spending to increase by 8 percent in 2012.

“In many communities across the nation, industrial contractors can be characterized as busy, or at least increasingly occupied, while commercial contractors generally have struggled with overcapacity in 2011,” said Basu. “However, following several years of decreased spending, ABC expects lodging and office construction to progress in 2012.

“Unfortunately, the impact of tight state and local government budgets will continue in 2012,” Basu said. “A number of key categories closely linked to state and local government spending are expected to decrease in 2012, including educational spending, edging down 4 percent. Overall, ABC forecasts public nonresidential construction spending will slip 2 percent in 2012.”

ABC Reports: Construction Backlog Grows 4 Percent 
in First Quarter of 2011

Associated Builders and Contractors (ABC) today reports that its Construction Backlog Indicator (CBI) for the first quarter of 2011 averaged 7.3 months, a 4 percent increase from 7.1 months during the fourth quarter of 2010, and up from 6.1 months, or an increase of 21 percent, from one year ago. CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.

“While the commercial and industrial construction industry is no longer in deep decline, meaningful recovery remains elusive, with CBI still below levels associated with vigorous nonresidential construction activity,” said Associated Builders and Contractors Chief Economist Anirban Basu. “However, crisis conditions have abated and the indicator is moving in the right direction. CBI is now 33 percent above its historic low point of 5.5 months registered in January 2010.

“The expectation is that the U.S. economy will fall short of growing 3 percent in 2011. At the same time, other macroeconomic factors, including sharp increases in construction materials prices, have the potential to reverse the stabilization in activity that ABC presently observes,” Basu said.

“A decline in backlog associated with the infrastructure category is likely a reflection of an ongoing reduction in the influence of federal stimulus funding in a number of segments, including highway and street, and conservation and development. Given the expected reduction in infrastructure investment by state and local governments, further decline in backlog in the infrastructure category is likely,” said Basu.

“The improvement in commercial construction-related backlog is precisely what ABC observed and forecasted in its previous report, and we anticipate that this segment will continue to show signs of life and growth in the months ahead,” Basu said. “However, given tougher lending standards and high vacancy rates in a number of commercial categories, stakeholders should not anticipate any burst of activity this year.”

Regional Highlights

  • The Northeast, led by recovery in financial services and technology, and the Middle States, led by growth in activity related to natural resources and industrial production, have experienced significant backlog expansion in recent quarters.
  • The South continues to report the lengthiest backlog of any major region, with backlog rising by more than a month, up from 7 months to 8.2 months, over the past two quarters. Over the past four quarters, backlog is up by 1.75 months.
  • Despite recent growth, the Middle States continue to experience the smallest backlog on average, largely because this region of the country experienced the sharpest reduction in backlog during the worst of the economic downturn.

CBI Map of Regions: First Quarter 2010 v. First Quarter 2011


“With investment in power generation and natural resource exploration having taken a leadership role in the nation’s economic expansion to date, regions that are more natural resource intensive have generally experienced the largest increases in construction backlog. This helps explain the significant improvement in backlog in the South and Middle States since the fourth quarter of 2009,” said Basu. “In contrast, much of the western United States is associated with disproportionately high unemployment and largest state fiscal shortfalls, which explains the general lack of improvement since the end of 2009.”

Industry Highlights

  • Only one of three major industry segments tracked by ABC experienced an increase in backlog – the commercial construction sector.
  • Backlog in the infrastructure category has declined for three consecutive quarters and is now approaching levels consistent with the pre-federal stimulus period.
  • Backlog in the heavy industrial category has been nearly unchanged over the past three quarters. Slower investment in this category may at least be partially attributable to a surge in construction materials prices, which may have delayed plans for plant expansion in certain contexts.


“What CBI indicates is that there is a rotation in construction spending taking place, with infrastructure-related spending slowly slipping as stimulus monies are spent down and commercial construction gradually stabilizing along with the broader economy. This pattern will likely continue going forward, but overall construction volume is positioned to decline over the next several months before stabilizing later this year or sometime in 2012,” Basu said. “If construction materials prices are better behaved going forward, the recovery in commercial and heavy industrial construction may accelerate. However, infrastructure-related construction is largely dependent upon government budgetary decisions and for now the focus remains largely upon government cost-cutting as opposed to accelerating investment.”

Highlights by Company Size

  • During the first quarter of 2011, backlog rose for all categories of firm size.
  • As has been the case for many quarters, the larger the firm, the larger the average backlog.
  • Average backlog for the smallest firms, those with revenues below $30 million per annum, now stands at 6.4 months, the highest quarterly reading on record.


“Backlog continues to expand among the smallest, most fragile construction firms. This is largely attributable to the broadening of the construction recovery beyond the infrastructure segment. Backlog may also be stabilizing for this group due to high failure rates among competitors, who correspondingly cede market share to surviving firms. Backlog for firms in the second smallest category, those with revenues between $30 million and $50 million per annum, is roughly unchanged from year-ago levels, suggesting that for many contractors the recovery is far from vigorous,” said Basu. “Interestingly, backlog continues to rise for the largest firms on average despite the gradually diminished impact of federal stimulus spending.”

New 907H Rounds Out Cat Compact Wheel Loader Lineup

The new Cat 907H, the latest addition to the Cat Compact Wheel Loader range, fits between the 906H and 908H models to give buyers more choices. The new 70-net horsepower model features a skid steer loader style coupler, auxiliary hydraulic system, Cat C225963_CIM02C3.4 diesel engine, two-speed hydrostatic drive; both axles have, as standard, locking differentials; parallel-lift Z-bar loader linkage and high-visibility operator’s station. Optional features include high-flow hydraulics, ride control and speeder transmission. The new machine is designed for a diversity of landscaping, industrial and general-construction applications.

The hydraulically actuated skid-steer-loader-type coupler, which the 907H shares with the 906H and 908H, allows use of many of the hydro-mechanical work tools that customers presently own for Cat Skid Steer, Multi-Terrain and Compact Track Loaders. This capability expands the 907H’s versatility and allows the machine to be easily integrated into existing small-equipment fleets. Standard auxiliary hydraulics, proportional third-function valve and continuous-flow capability provide a complete control package for work tools such as trenchers and stump grinders. The optional 33-gpm high-flow system handles the most demanding tools such as cold planers and snow blowers, for example.

Like its 906H and 908H counterparts, the new 907H features articulated steering for precise maneuvering and axle oscillation for positive traction in rough terrain. For added traction in poor underfoot conditions, differential locks (in both axles) can be engaged on the move to reduce wheel spin and tire wear. With parallel-lift Z-bar loader linkage, the fork-equipped 907H places loads surely and precisely, and when fitted with its 1.3-cubic yard (1.0 m³) bucket, the 907H works aggressively and has ample dump clearance. In all applications, the Tier-3-compliant Cat C3.4 engine delivers smooth power, excellent fuel economy and long life.

Operator amenities, serviceability and options

Any of the three operator stations available for the 907H—canopy, Comfort Cab or Deluxe Cab—ensures safety and comfort. An optional air ride seat combined with low-effort steering and pilot controls reduce operator fatigue and provide convenient, intuitive operation. The multi-functional joystick provides basic lift and tilt functions, as well as controls for selecting travel direction, travel speed, third-function hydraulics, continuous flow or activating the differential lock. The roomy 907H cabs are 5 inches higher than the 906H cab, providing expansive visibility to work tools and the surrounding work area.

To encourage good routine maintenance, the 907H has a high-opening engine hood and side service doors that allow easy, ground level access to all major components and service points. The articulating hydraulic-oil cooler gives ready access to the radiator, and both are easily cleaned. Vertical, spin-on filters (engine-oil, hydraulic and fuel) are replaced quickly with no spillage, and S.O.S. valves and pressure taps are conveniently located in the engine compartment.

The 907H’s capability to handle hydro-mechanical work tools is enhanced with an optional wiring harness that permits fourth-function control (broom angling, for instance). In addition, an available creeper feature, complete with hand throttle, allows the operator to easily maintain consistent, slow ground speed, while the work tool runs at high speed for efficient production.

The optional speeder transmission, which adds a two-range gearbox to the drive train, provides travel speeds to 21.7 mph and incorporates hydraulically actuated, oil-immersed disc brakes in the front axle. Available ride control cushions boom-cylinder movement during load-and-carry operations, resulting in a smoother ride for the operator and less material spillage.

907H Basic Specifications

Engine power, net                                  70 hp

Operating weight                                   12,809 lb

Bucket capacity (GP)                             1.3 yd³

Wheelbase                                               85 in

Fuel tank capacity                                 20.6 gal