CAM, the Construction Association of Michigan, reports the results of its October Activity survey, in alignment with the previous Spending Plans survey. Survey is for commercial construction, non-residential building. This is comparing actual to expectations in a sentiment based format. Information is lagging and does not account for current events, such as; October Stock Market rebound, November Elections, improving headline unemployment.
Graph of Actual Data “Activity Index”
Graph of Expectations “Spending Plans Index”
Bottom Line: Respondents are seeing fewer bid opportunities, fewer awards, and an increase in material prices.
My experience confirms this too. While I have seen as much bidding as I can handle, I have had to increase my range of interest (drawing a circle around Toledo, the circle just got bigger), yet my awards (bid-to-win ratio) are down on a relative basis. In the meantime my drywall supplier keeps sending me letters about double digit increases in drywall and metal studs, not that I buy much of these, but they are important proxies. Meanwhile DalTile is currently advising me through their quote notes, that come June all orders will bear a 3% freight surcharge. While not double digit inflation, it is nonetheless upward. Price increases are notoriously hard to pass on to clients, especially while activity is down. This is extreme margin pressure.
Expect the shake out to continue. Only the leanest most professional organisations will survive;
- Find innovative ways to cut overhead
- Speed up receipts.
- Watch those credit lines.
- Call on your customers, ask for their business.
- Be very selective about who gets your best number.
- Stick with the winners.