Dodge Momentum Index Slows

The Dodge Momentum Index slipped 2.6% in February compared to the previous month, according to McGraw Hill Construction. The latest month's retreat is expected to be a brief pause in a broader upward trend, Dodge says. Weak employment growth in December and January raised concern that the U.S. economic expansion was losing momentum, dampening planning for commercial and institutional buildings. Moderate improvements in the February jobs report should alleviate some of that concern.

Equipment Dealer Optimism Hits New High

Construction optimism has reached a nearly two-decade high of 124 points, after bottoming out in 2009 with 42 points, say contractor and equipment-dealer executives in Wells Fargo Equipment Finance's annual owners' survey. A score of 100 or more represents high construction confidence, while scores below 75 reflect pessimism. Five hundred and twenty-two respondents expressed optimism in the residential and commercial sectors, with a third expecting an uptick in work in 2014's second half. New and used equipment purchases are expected to increase by less than 5% in 2014, with 80% of buyers keeping machines for five years or more.

Meanwhile, 91.2% of contractors will rent machinery as needed due to inconsistent work (72.8%) and ownership costs (52.5%), among other reasons. "The growing trend of equipment rental will remain strong in 2014," said Wells Fargo construction-group national sales manager John Crum. "Distributors and equipment rental companies almost universally say they will maintain or grow the size of their rental fleets." Despite high optimism, 81.8% cite economic uncertainty as a top concern that could derail future construction activity, followed by interest rates, political fighting and regulatory issues, including expiring bonus tax depreciation incentives.