Dive Brief:

• Construction industry executives are enthusiastic about nonresidential activity in 2017, scoring the third-highest Optimism Quotient in 20 years with a mark of 123 on the Wells Fargo Equipment Finance Survey. Scores higher than 100 indicate strong optimism about activity in the coming year.

• Eighty-four percent of survey participants believed that moderate to significant growth is in store for the industry during the next two years, up from 62% who said the same in 2016.     

• The positivity exhibited by the heads of contractors and equipment distributors responding to the survey was propelled by the spending anticipated from President Donald Trump's infrastructure plans, as well as higher company profits.

Dive Insight:

The report indicated that the contractor market for new (39% increase) and used (25% increase) equipment should be robust in 2017. One of the most telling measures of activity ahead in the market, according to Wells Fargo, was the drop in the number of contractors expecting to decrease their new (13%) and used (11%) equipment purchases in 2017 compared to 30% and 20%, respectively, in 2013.

Contractors are still somewhat apprehensive about cost, with 24% most concerned about an uptick in employee wages and benefits, 21% about taxes and 19% about healthcare. More contractors (18%) were concerned about equipment costs in 2017 than were in 2016 (10%). That lead 38% to respond that they believed demand for rental equipment would grow in 2017, compared to 27% who said the same in 2016.

Although the Wells Fargo report is largely positive, equipment giant Caterpillar in January lowered its 2017 forecast, despite experiencing a 16% increase in share prices credited to the market-wide optimism bump following President Donald Trump's election. The company, which is typically a bellwether for activity in the market, cut its 2017 revenue projections from $38 billion to between $36 billion and $39 billion, and it said that profit per share would be around $2.90 instead of the previously estimated $3.04 per share.

Caterpillar also said it was stock-heavy in its North American market and was feeling the pinch of a decrease in demand from the international construction and energy sectors.