2005 Forecast Finds Optimism Across the United States
TEMPE, Ariz., Dec. 8 /PRNewswire-FirstCall/ -- CIT Equipment Finance, a
unit of CIT Group Inc. (NYSE: CIT), today announced the results of the 29th
annual CIT Construction Industry Forecast. The 2005 outlook indicates that
U.S. construction industry leaders are predicting a strong year ahead as their
confidence hit an all-time high. Of nine U.S. regions surveyed, six showed an
increase in optimism. CIT Equipment Finance is one of North America's leading
providers of financial services to the construction industry.
(Logo: http://www.newscom.com/cgi-bin/prnh/20041004/NYM003LOGO )
"In last year's CIT Construction Industry Forecast, U.S. construction
industry executives told us that they could see the light at the end of the
tunnel after several years of economic uncertainty," said Roy Keller,
President of CIT Equipment Finance. "This year, it looks like the industry
has made its way out of the tunnel altogether and the forecast is brighter
than at any time in the last decade."
Now in its 29th year, the CIT Construction Industry Forecast independently
surveys U.S. construction executives on their perceptions of the state of the
industry and trends for the coming year. Over 900 contractors and equipment
distributors were surveyed via telephone interviews across the country.
The Optimism Quotient (OQ) is the Forecast's primary indicator for
assessing and comparing the respondents' level of confidence in the health of
the construction industry. The OQ is a weighted and averaged number that
expresses construction executives' perceptions of the industry's prospects for
the coming year. Generally, a number of 100 or higher indicates strong
optimism in the industry's one-year outlook while a number below 100 indicates
a more cautious projection.
2005 OQ: "Strong Optimism"
The 2005 Construction Industry Forecast's overall optimism quotient rose
six points -- from last year's 103 to 109 -- the highest-ever rating since the
OQ was developed in 1995. The OQ for contractors dipped one point and it rose
13 points for distributors (please see chart below).
National Optimism Quotient Trend
Total Contractors Distributors
2000 102 100 103
2001 93 92 93
2002 88 86 90
2003 89 88 89
2004 103 101 105
2005 109 100 118
Regional Highlights:
The U.S. was divided into nine regions for the survey:
* West South Central: Arkansas, Louisiana, Oklahoma, Texas
* East South Central: Alabama, Kentucky, Mississippi, Tennessee
* Mountain: Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah,
Wyoming
* South Atlantic: Delaware, District of Columbia, Florida, Georgia,
Maryland, North Carolina, South Carolina, Virginia, West Virginia
* Pacific: Alaska, California, Hawaii, Oregon, Washington
* New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode
Island, Vermont
* Middle Atlantic: New Jersey, New York, Pennsylvania
* West North Central: Iowa, Kansas, Minnesota, Missouri, Nebraska, North
Dakota, South Dakota
* East North Central: Illinois, Indiana, Michigan, Ohio, Wisconsin
Following are the key 2005 regional highlights:
* The OQ increased in six of nine U.S. regions
* The East South Central is the most positive region, posting an OQ of
125, one of the highest regional OQ ratings in the Forecast's history
* The East North Central region experienced the highest year-over-year OQ
increase (16)
* The East North Central, East South Central and Pacific experienced the
highest year-over-year OQ increases (10-16)
* Three of the nine regions showed double-digit OQ increases for 2005
* Three of the nine regions scored below the baseline 100 on the OQ scale
* Five of the nine regions recorded OQs above 110
* Only three regions reported that they were less optimistic this year
than last, and their OQ scores declined by only one or two points each
* The New England region had the lowest OQ rating (90)
A statistical summary of each region follows:
Region 2004 OQ 2005 OQ OQ Change
(in points)
East South Central 114 125 11
West South Central 118 121 3
Pacific 105 115 10
Mountain 114 113 -1
South Atlantic 113 112 -1
East North Central 90 106 16
West North Central 90 98 8
Middle Atlantic 91 92 1
New England 92 90 -2
National Average 103 109 6
U.S. Construction Trends
* Equipment Overview:
After back-to-back years of growing optimism about the future, many U.S.
construction contractors feel confident enough to increase their investment in
new and used construction equipment in 2005. While the percentage of
contractors planning to buy new equipment stayed about the same, they are
planning to spend considerably more on their purchases in 2005 than they did
in 2004. On average, contractors who plan new-equipment purchases expect to
invest $79,223 in 2005 -- double what they planned to spend in 2004.
Consistent with contractors' plans, 54% of equipment distributors expect
to sell more new equipment in the coming year, up from 51% a year ago.
Contractors
* What kind of equipment do you plan to purchase in 2005?
Highway Trucks 37%
Hydraulic Excavators 18%
Rubber-Tire Backhoe Loaders 17%
Hand Tools 16%
Skid Steer Loaders 12%
Wheel Loaders 11%
Compaction Equipment 10%
Elevating Work Platforms 10%
Fork Lifts 9%
Crawler Dozers 8%
Cranes 6%
Asphalt Pavers 5%
Other Types of Equipment 12%
Base: 213 respondents who expect to purchase new or used equipment
* Rental Overview:
As they look ahead to busier project schedules in 2005, contractors expect
to be slightly more active when it comes to leasing and renting construction
equipment they will need to get the work done. Sixty-three percent of
contractors said they rent the kinds of equipment that they do not need to use
all the time. Fewer contractors (23%) cited cost as a motivator for renting
equipment than last year, when 37% of respondents said they rented equipment
because it was more cost-effective.
As demand for rented and leased equipment rises, so will rates. An equal
number of distributors and contractors (52%) anticipate that rates will
increase in 2005. At this time last year, only 30% of distributors planned to
hike their rental rates in 2004.
Sixty-seven percent of distributors said they compete head-to-head with large
equipment rental firms, down markedly from the 76% that said they faced such
competition in last year's survey.
Contractors
* What type of equipment do you expect to rent most often in 2005?
Loaders/Backhoes 16%
Excavating Equipment 14%
Compaction Equipment 9%
Elevating Work Platforms/
Scissor Lifts 9%
Small Tools 8%
Forklifts/Fork Trucks 7%
Crawler Dozers/Wheel
Dozers/Tractors/Bulldozers 7%
Scaffolding 6%
Cranes 3%
Concrete Equipment 3%
Trucks 3%
Trenchers 2%
Air Compressors 2%
Jackhammers/Air Hammers/
Electric Hammers 1%
Skid Steel Loaders 1%
Other 7%
Base: 217 respondents who plan to rent equipment
* Finance:
More than half (51%) of distributors expect their net income to increase
in 2005 and 42% expect it to stay about the same, compared to 49% and 40%,
respectively, a year ago. Contractors are slightly more cautious, with 35%
anticipating that net income will grow (compared to 36% in 2004) and 56%
expecting it to stay the same (vs. 53% last year).
Eighty two percent of contractors and 79% of distributors said that their
company's total financing costs will increase in 2005.
The median sales volume projected contractor companies is up about 11% in
this year's survey to $600,000. Distributors' median sales are up about 5% to
$3.9 million. As construction activity picks up, it is clear that industry
executives are keeping a close watch on both sides of the accounting ledger.
They are focusing on growing sales, controlling costs and increasing net
income.
* Business Strategies:
With a booming market for new housing and softness in commercial
construction activity in many parts of the country, contractors have focused
most of their attention on residential construction in recent years. In last
year's survey, 71% of builders said that home and apartment construction was
their primary business. But that number declined five points to 66% this year
and more builders (21% vs. 15%) said commercial construction was their main
focus.
When asked to name their most important marketing strategies for 2005,
more than one-third of distributors said they plan to diversify their business
even further. At 34%, that is up two percentage points from last year and up
a total of 10 points from the 2000 Forecast.
As an indicator that the construction climate is improving, 30% of
distributors expect the number of contractors in their area to increase in
2005 -- twice as many as predicted an increase two years ago.
Relationships continue to be a major driver of business in the
construction industry, according to both contractors and distributors.
Eighty-five percent of contractors and 88% of distributors said industry
friends and colleagues were a valuable source of business information - the
highest ranking in our survey. Industry journals, daily newspapers and
meetings and seminars are also highly regarded. Distributors are
significantly more likely than contractors to turn to the Internet for
information; 69% of distributors said the Internet is a valuable information
source, compared to 51% of contractors.
* Technology:
The Internet has become an essential business tool for construction
companies all across the United States. Twenty-seven percent of contractors
in this year's survey now have a company website up and running, a 50%
increase over the 18% of contractor companies that said they had an Internet
presence in last year's Forecast. Nineteen percent of contractors without a
current website plan to be online by the end of 2005. Due to the nature and
size of their companies, even more distributors have an online presence - 67%
in this year's survey compared to 69% a year ago. Twenty-seven percent of
distributors who are not online today, hope to be in 2005. While there is
already a high level of Internet use across the industry, more than half of
contractors and three-quarters of distributors predict that their business use
of the Web will grow in 2005.
For 2005, distributors predict that, on average, 11.7% of their equipment
sales will be made over the Internet, up just slightly from last year's
estimate but up about 83% from the sales level projected in the 2001 survey.
Contractors also use the Internet to promote their companies and build
their reputations in the business community. Sixty-two percent of contractors
post information about their projects on the company website, an increase of
10 percentage points from last year's survey and 58% post customer references.
* Issues and Opportunities:
Residential construction is viewed as the most promising business
opportunity for 2005 by 62% of builders, down slightly from 64% who felt that
way a year ago. Twenty-nine percent of non-builders agree with that
assessment, up from just 16% last year. This marks the first time in at least
six years that more non-builders see the prospects for residential building as
being more promising than the commercial parts of the construction business.
For the fifth consecutive year, distributors were most positive about
general construction opportunities. Forty percent of distributors said
general construction was the industry's single best opportunity, equaling the
findings of our 2004 survey.
The rising cost of health insurance is still the biggest issue on the
minds of construction executives taking part in the 2005 Forecast, though
fewer industry leaders identified insurance costs as a problem this year than
last year. In 2004, 89% of contractors and 87% of distributors said insurance
costs were a major industry problem; this year, 81% of each group mentioned
insurance costs.
Other National 2005 Forecast Highlights:
Contractors
* What is your projection for construction activity in 2005 compared to
2004?
Increase 38%
No change 50%
Decrease 12%
For a copy of the 2005 CIT Construction Industry Forecast,
please contact Sarah Malinowski at (201) 460-2845.
About CIT Equipment Finance
CIT Equipment Finance is a leading lessor and lender in the construction,
printing, machine tools, plastics, healthcare, and manufacturing markets.
Further information can be obtained at the company's website at
http://www.cit.com or http://www.efinance-it.com.
About CIT
CIT Group Inc. (NYSE: CIT), a leading commercial and consumer finance
company, provides clients with financing and leasing products and advisory
services. Founded in 1908, CIT has approximately $50 billion in assets under
management and possesses the financial resources, industry expertise and
product knowledge to serve the needs of clients across approximately 30
industries. CIT, a Fortune 500 company and a component of the S&P 500 Index,
holds leading positions in vendor financing, factoring, equipment and
transportation financing, Small Business Administration loans, and asset-based
lending. CIT, with its principle offices in Livingston, New Jersey and New
York City, has approximately 5,800 employees in locations throughout North
America, Europe, Latin and South America, and the Pacific Rim. For more
information, visit http://www.cit.com
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