With thousands dead or missing, the loss of life is overwhelming, but it's also clear there will be a large economic impact, especially for those of us in the construction industry.
Ken Simonson, chief economist for the Association of General Contractors, recently said he expects materials prices to rise an average of 10 percent next year. The biggest increases will probably come in concrete because of New Orleans' role as a major port for cement imports. (For more on Katrina's impact on cement shortages, see p. 14.)
Eventually, the need for reconstruction in the Gulf Coast could lead to a mini-building boom, but it may not be enough to offset decreases elsewhere, especially in residential construction. Many economists are predicting that Katrina will be the thing that finally slows that market. Many so-called experts have been predicting the bottom was going to fall out of the residential market for years, but there are signs that it could happen.
There is a lot of fear among consumers right now — consumer confidence plunged to a two-year low in September. The biggest issue is rising costs for natural gas and fuel. Depending where you live in the country, heating costs are expected to rise somewhere between 40 to 100 percent this winter. And we've all felt the impact of $3-a-gallon gasoline. Those two items will eat up a lot of previously discretionary income that could have gone to remodeling or building a new home.
While you can't control the business that is out there, you can affect how well your company is run. Take a good look at the systems you have in place to make sure you're running a cost-effective operation. Make sure your contracts are up to date with good, tight language that will protect you from rising costs. And most importantly, double-check your job-costing to make sure you maintain the profit margins you need.
On a related note, the American Society of Concrete Contractors is still planning on having its Decorative Concrete Council Spring Fling in New Orleans in March. Although the plans are tentative at this point, the association may contact local officials to see if there are projects that members can help with as part of the conference. We'll keep you informed as the conference gets closer, or you can contact the ASCC at (866) 788-ASCC.
Jonathan Sweet
Editor
