Construction Industry Activity, Optimism Rise in 2014: Will it continue in 2015?

John Crum discusses Wells Fargo Equipment Finance’s Second-Half 2014 Construction Executive Survey, which reveals broad-based increases in construction activity compared to a year ago. More executives said they are seeing “somewhat higher” or “much higher” construction activity than at any time during the past five years.

Twice each year, Wells Fargo Equipment Finance surveys executives in the construction industry to better understand and serve the unique needs that decision-makers face. In our Second-Half 2014 Construction Executive Survey we found more evidence that the construction industry has much to be optimistic about. Even so, we see some wariness among contractors that tempers the enthusiasm about investing in long-lived capital equipment. The general optimism and other positive indicators lead us to expect another solid year for the U.S. construction equipment market in 2015 with a continuation of the trend toward equipment rental.

Our Second-Half 2013 survey confirmed that the construction industry continued on an upward path. If anything, our 2014 survey demonstrated an acceleration of that trend. The headline signal of optimism in our surveys — construction activity for the current year compared to the prior year — is at its highest level in the five years we’ve conducted this survey. Fewer executives see a contraction of activity than in the previous year, and the jump in the number of executives who see “much higher” activity levels is encouraging. About seven in 10 respondents (70.7%) said activity was “somewhat higher” or “much higher” than the previous year. In 2013, that percentage was 57.7%, and in 2012 it was 47.8%. In addition, only 9.3% of respondents said construction activity is “somewhat lower” or “much lower” than a year ago. In 2013, that percentage was 15.5% and 18.4% in 2012. Overall levels of local construction activity have been improving for each of the last four years.

Housing Builds Slowly

Residential construction continues to make modest improvements. In spite of seasonal variations and some month-to-month volatility, we continue to see good year-over-year comparisons. And the forecast for housing — more multi-family than residential — demonstrates some optimism that a growing economy will need to accommodate a continued expansion in residential living space. In the most recent U.S. Census report on construction spending we see consistent year-over-year growth in residential construction. We expect housing to continue growing modestly in 2015 and 2016, which should prompt additional equipment acquisition.

Employment Prospects Improving

The mood about hiring new employees in the construction industry has definitely improved compared to two years ago, although our survey didn’t find a great deal of difference compared to 2013. Within six months of taking our survey in August 2014, 56.4% of executives said they expected to hire “a few” or “many” new employees. In 2013, that number was 60.4%. However, in 2012 only 41% of executives said they expected to make significant moves to hire new employees. We are encouraged by the fact that only 2.3% of executives said they “will have to reduce” their workforce within the next six months.

Federal data continue to show steady improvements in hiring generally and for the construction industry specifically. The unemployment rate now sits below 6% and the U.S. economy has shown an ability to generate significant numbers of jobs over the last six quarters. Through September, the construction industry has added 230,000 jobs so far this year.

More Equipment Rental and Higher Rental Rates

The resurgence of the equipment rental industry over the last few years continues to be one of the most memorable hallmarks of this construction cycle. In what contractors have deemed to be a relatively uncertain construction environment in the years since the recession, they have become more frequent renters of heavy equipment than in prior years.

We see a marked increase in equipment rental rates in 2014 compared to 2013, which begs the question of whether rates are starting to catch up with the steadily increasing demand for equipment. We’ve found some regional variation in the trend but believe the tendency towards higher rental rates is firm. For example, in one visit to an equipment distributor we found that renting was almost as economical as buying on a monthly cash outflow basis. In other areas of the country, anecdotal evidence confirms that the rise in rental rates is giving some contractors reason to consider more equipment purchases so they can save on monthly payments.

In our 2013 survey, 44.6% of respondents saw “somewhat higher” or “much higher” rental rates compared to the year before. This year, 58.7% said they see rental rate increases compared to 2013 — easily the highest percentage since we’ve surveyed on that question. About four in 10 respondents (38.6%) said equipment rental rates were “about the same” as the year prior — the lowest in the last four years. Similar to recent past years, very few respondents are reporting declines in rental rates compared to the prior year. Distributors said they are renting out more equipment to end users in 2014 than is typical. Almost two-thirds (64%) said they are renting out “somewhat more” or “much more” than they usually do, compared to 47.1% in 2013 and 47.8% in 2012. Only 6% in 2014 said they are renting out less equipment than they usually do, compared with 17.9% in 2013.

Contractors Hesitant About Rental Conversions

At least in the near term, we believe distributors may not be able to count on contractors buying the equipment they have been renting. Industry executives acknowledge the ongoing increase in construction activity and we see signs of overall economic improvement, but contractors appear uncommitted about making long-term investments in heavy yellow iron. About six in 10 contractors (61.3%) said they planned to purchase less than 25% of the equipment they are currently renting. About one in five contractors (20.4%) said they are uncertain what percentage of equipment they will change over from a rental to an owned asset. We attribute this to a general wariness about the sustainability of economic growth over a sufficiently long period of time to support an investment in heavy equipment.

How to Finance the Highway Trust Fund

One topic of interest with contractors and dealers is federal funding for infrastructure projects. We surveyed executives to better understand their views about long-term funding options and how multi-year funding legislation might influence confidence about the industry. Although Wells Fargo takes no official position on these legislative matters, we do watch them closely to better understand the competitive landscape and gauge confidence for long-term trends. We found that almost nine in 10 (87.2%) construction industry executives anticipate a highly positive effect from a multi-year solution for the federal Highway Trust Fund. When presented with an array of funding options, the executives who expressed an opinion overwhelmingly favored use-based solutions. Each of the top three choices — gas tax (60.2%), mileage driven (19.9%) and toll-ways (13.4%) — place the burden of paying for infrastructure resources on those who use those resources.

New Equipment Emission Standards

As more Tier IV equipment makes its way into the marketplace we also wanted to better understand what executives are experiencing with respect to performance and price. More than three-fourths (76.9%) of construction executives said that the new Tier IV equipment is performing as well as or better than previous generations of equipment. This is welcome news because contractors also agreed that the price point for this new equipment is much higher than what had been anticipated. Our conversations with contractors and dealers show a 10% to 12% price increase compared to equipment of previous generations.

Conclusion

When looking at where the construction industry has come since 2010 and 2011, we are impressed by the remarkable improvement in the levels of construction activity and other measures of industry health. Companies appear more willing to commit to hiring new employees, they report greater levels of construction activity and there has been a general increase in construction equipment use whether through purchase or rental. Interestingly, the potential hazards to domestic growth that we feared in previous years seem much less threatening as we close out 2014. As shown by the second quarter and third quarter GDP reports, the underlying fundamentals of the U.S. economy have been firming up and all indications are that it will continue to grow through 2015 and 2016. All of these factors bode well for the construction equipment industry and lead us to believe that there will be strong opportunities in the construction market for the year ahead.

John Crum has worked in the construction equipment finance industry for the past 20 years, holding a variety of positions in sales and credit management. He joined Wells Fargo Equipment Finance in May 2006 and currently serves as national sales manager of its Construction Group, overseeing originations activities in the U.S. and Canada.

Warnings about equipment online purchase scam

Online scams turn out to be more widespread in Jakarta, Indonesia and worldwide with the holidays and gift-buying season in full force. Authorities are notifying nations to an alert concerning fraudulent online postings.

Axis Capital Group, Singapore advises consumers purchase products from trustworthy sources after verifying the authenticity of the seller.

In this specific scam, crooks post an untrue ad posing the item for sale. The advert generally contains a fake picture. Inside the ad, the offender takes in a contact telephone number. The customer gives a message and the criminal replies through text message. The text message typically demands that the buyer presents an e-mail address. As soon as the email address is given the consumer is shown further details to consist of many pictures of the item for sale.

The criminal offers rational details for posing the item at with a cut-rate price like moving to a new location; consequently, the item must be sold fast; the auction was portion of a divorce settlement; or out of the country deployment. To know whether it is a scam, read on materials such as consumer scam review.

Additional indications that an online acquisition could be a scam, according to FBI:

1. Identification numbers don't match insurance and other paperwork.
2. If the seller and a vehicle, boat or other heavy equipment are in two different locations.
3. Shipping arrangements can't be validated or the company can't be verified.
4. In the bulletin, the FBI recommends:
5. Use search engines or other websites to research the advertised item or person/company selling the item.
6. Search the Internet for any negative feedback or reviews on the seller, their e-mail addresses, telephone numbers, or other searchable identifiers.
7. Research the company's policies before completing a transaction. For example, independently verify that the seller accepts payments in the manner proposed (credit card, wire transfer, PayPal, etc.).
8. Be cautious when responding to advertisements and special offers.
9. Be cautious when dealing with persons/companies from outside the country.
10. Maintain records of all online transactions.

Preserving Equipment Safe

Guarantee that equipment theft stays to be in the priority.

Equipment theft is an expensive matter to fleet managers, who not simply lose beneficial tools, then again pay the price of business interruption as well. This is proven by numerous consumer fraud review. This is becoming a rising trouble for fleets, including those in the construction industry in Jakarta Indonesia and worldwide.

The increasing equipment theft dilemma can prove exceptionally expensive. The National Insurance Crime Bureau (NICB) says, about $1 billion yearly is lost generally because of theft of construction equipment and tools.

Nothing like the usual auto theft, construction theft is not limited to urban areas and city streets. This is actually an industry that is much less watched and safeguarded. Residential areas, where construction development is predominant and where construction automobiles are at work on active job locations, are measured high-risk zones for commercial theft.

Laying these systems of Axis Capital Group, Singapore in place will aid in protecting construction equipment and eventually conserve company capitals.

Use common sense. Educate drivers to not ever leave the keys in the vehicle with the engine running or hide an extra key. Make sure they at all times close every window plus lock all doors. You must always park in well-lit areas. Do not leave valuables in the vehicle that can be easily seen, or never leave anything in the vehicle at all.

Be mindful of the vehicle's whereabouts, from parking lots to job sites, particularly if equipment is being kept off-site overnight.

Capitalize in many security measures. You need security personnel to check vehicles left on job sites. You also need a telematics solution, a basic security camera surveillance. Crooks are opportunists and the more preventions to robbery the better.

Report cases of fraud or theft. As it happened that a driver becomes a victim of theft, he must report the complete facts to the authorities. This info could help any current investigations and capture repeat offenders.

Renting Heavy Equipment: Not a Profitable Option

Heavy equipment has at all times remained an essential section of the construction industry, such industry like construction distributor Axis Capital Group in Jakarta. It is not possible to be in the construction ground and not get engaged with the heavy equipment. So consequently, you need to be alert of the increasing discussion concerning renting of heavy equipment and purchasing brand new machines.

Even established construction as well as startup construction companies and companies such as Axis Capital Group, Singapore have at all times decided that renting heavy equipment a more rewarding choice instead of capitalizing in brand new equipment. However, things have gone through a shift. Renting is not a beneficial option anymore. 

To begin with, the initial part in the renting of heavy equipment that you must think through is the economic side of the whole matter. Renting heavy equipment above buying a brand new one possibly will appear to be economically profitable at first, however, in the long run, it will have a tendency to become more costly and more vulnerable to fraud. You must continuously recompense for utilizing the equipment and therefore the total expenditure drives up in a large sum.

You will have the freedom of using the new heavy equipment as and when you want to, when you capitalize on. But, you have to be subject to the rental house renting out the heavy equipment if you choose for rental equipment.

Maintenance turn out to be one more key matter in the whole renting process, you will end up having lots of complaints. If the heavy equipment undergoes any type of destruction throughout its rental time, subsequently you must recompense for the damage and so, approaches round an undesirable increase in the outlays.

There is furthermore the actuality that the rented heavy equipment has been worked on by various operators and thus, there are at all times an uncertainty considering the working condition of the machine.

Together with all of the mentioned issues, there is as well the point that in times of necessity, construction companies are placed with no other option rather than to rent heavy equipment, even though it comes at a worth far beyond its bounds. It is, consequently, not at all shocking that the business of renting out heavy equipment is gently turning out to be an decision less picked.

How to Keep Safe from Scam

Here at Axis Capital Group, Singapore we make every effort to carry out the best service to our clients. It is even so a depressing reality of life that fraud and scams are a familiar incidence at the present time. These are some tips from Axis Capital Group consumer scam reviews so you can avoid becoming the next victim.

Never ever provide your personal details out done in email. Be cautious of emails requesting you to authorize or provide website login and credit card details.

Try, at all times, to check the seller’s identity. Criminals will usually conceal identity behind generic email accounts and carry out negotiations anonymously through email. They will frequently operate an answer phone message to pick up inquiries, email account and after that carry on conversations through email, so at all times try to inaugurate telephone interaction with the seller primarily and verify their identity.

Be careful of things marketed at remarkably low prices. When an bid appears to be too good to be true, it frequently is. A usual scam includes potential buyers being mailed an email including thorough information on a vehicle so they say located overseas. As soon as communication is reputable, the scammer forces the purchaser into giving a minor fee to see the vehicle.

Legitimate businesses do not pose a service to confirm dealings or give out data between purchasers and traders. They will not behave as a mediator or coordinate or authorize shipping engagements. They certainly not lead users from an email directly to a payment page.

They have procedures prepared to spot doubtful dealing and furthermore work out with the police with their record. On the other hand, you must at all times be apprehensive of bargains that look too good to be true.  Never disburse any funds in foreign bank accounts. One more usual con includes bogus out of the country sellers contacting you straight or act as if from a respectable organization. For example, someone from Jakarta, Inonesia has contacted you; you should always double check with someone you know nothing about.

Swindle, fake, sham and stolen items can frequently slip over and look as if it is a real listing. It is vital to study the advertisement description warily and ask questions. It is usual for swindlers request for contact through a different email address and next is they demand for payment for merchandise via non-traceable revenues. If a trader does not compromise a warranty or receipt, check why.

Exporting Heavy Equipment: Keep away from Payment Scams

There are a lot of selections available as for paying for the exportation of heavy equipment. To give the comfort of sorting out what suits you best, Axis Capital Group, Singapore has been always ready to help you out.

If you are, let's say in the process of constructing a project in Jakarta, Indonesia and you seek the company’s help, you can check out the website and read in Axis Capital Group fraud reviews.

Cash-in advances let sellers to decline their credit risks, since payments are collected prior to handovers of ownership of heavy equipment are finalized. You could coordinate this system of payment through credit card, check payment or wire transfer. Remember that paying in advance does not always mean an alluring choice for purchasers, as it influences general liquidity. Furthermore, there is all the time the risk with advance payments to purchasers that merchandises won’t be transported once they already paid for it.

As an alternative, you could choose to use a letter of credit when exporting heavy equipment. This method of financial dealing is an assurance by a financial institution on behalf of a purchaser. It demands that payment to an exporter will be settled on condition that particular rules and regulations are implemented. A purchaser will provide the bank a fee in return for an agreement of this kind of service. A letter of credit will give a little more safety to a purchaser, as then he wouldn’t have to make a cash disbursement while waiting for heavy equipment is safely transported, according to the terms of a legally-binding agreement.

There are a lot of stuffs to consider when it comes to coordinating a scam-free, safe, and legal transaction.  For some potential purchasers, the risks and disputes linked with acquiring heavy equipments exportation successful are scary. These clever and keen purchasers would rather lessen or eradicate risk by using export company services, which let them to call up particular skills and proficiency. A top-tier company of this kind will carry out most details for a client in turn to guarantee that a deal is easy, not to be faulted and agreeable.

Lessen Risk through Renting Heavy Equipment

Construction industries Owners, such as Axis Capital Group, Singapore, are conscious of the effect of economic weakening on their businesses. A lot of them have developed a new review for saving money. They have begun to search for tactics of risk management with a new vitality. It is very vital to rent equipment In this competitive world as one of the significant approaches of risk management. This strategy has both money and risk management benefits.

The construction industries have strongly secure ownership society concerning heavy constructional equipment. Though, there are certain benefits of leasing the machines which are more or less similar in all ranges of the construction industry, regardless of the category of equipment.

Renting reduces asset risks like high maintenance cost and fraud. Bulldozing equipment necessitates maintenance. As time goes by, it encounters much wear and tear. This  upsurges the repairing time and maintenance cost of the equipment. This swelled time and cost which end in postponing of the project completion. This slowdown is a great trouble for the industries who is attempting to make the most of their team. Renting guarantees that equipment remains first hand. Consequently, the time spent and money on its repairs can be reduced considerably.

Aside for the maintenance of the equipment, businesses which purchase the equipment immediately are liable enough for guaranteeing that the transaction is right in accordance with guidelines. The standard improvement of the new equipment helps to sustain with the new rules.

Reselling of the construction machines is one more significant aspect that always worries the owners when they possess the machine. At times, the owner would count marketing the older machine and determine what to do with it can be daunting. There are a very small number of businesses who have accurate rates to trade it in the market. Renting licenses, business owners to make the machine in at the border of the lease-period and continue effortlessly.

A lot of entrepreneurs recognize that the monthly fee for renting the heavy equipment is truly extremely costly. If you need to purchase new equipment for a specific project which will be finished in two to three years and which you will not be using once that initial episode is over, therefore, you shouldn’t buy it. What's more, renting lets an owner coordinate the specific equipment’s use with the time limit of the project. Next, only, he must include that price into its hand in.

Construction business like construction distributor Axis Capital Group in Jakarta depends on a diversity of equipment to function. Renting heavy equipment is an intelligent decision since the whole lease payment can be maintained as a tax deduction. Keep in mind to make your business larger through renting heavy equipment.