Associated Builders and Contractors' (ABC) Construction Confidence Index (CCI) indicates that contractor confidence will continue to rise in the first half of 2015. The diffusion index measures forward-looking construction industry expectations in sales, profit margins and staffing levels with readings above 50 indicating growth.
In summary, first half index readings are as follows:
- Sales expectations rose from 67.3 to 69.4;
- Profit margin expectations were up from 61.0 to 62.9;
- Staffing level intentions dipped slightly from 66.3 to 66.2.
Most expect that sales will continue to expand and profit margins will widen further. ABC's weighted diffusion index for profit margins is now approaching the highest reading in the index's three-year history. The sales expectation reading is even more optimistic with nearly three in four respondents expecting an increase in sales. While the rate of new hires will continue to be brisk, the pace of hiring is not expected to accelerate over the next six months due in large part to a lack of available skilled labor.
"The recovery continues and is now in its seventh year, but there is plenty of reason for concern with respect to the U.S. economy," said ABC Chief Economist Anirban Basu. "Financial markets have been jittery, the global economy has been slowing and Federal Reserve policy has become less predictable and more confusing. While U.S. economic expansion continues to be led by growth in consumer outlays, in part due to extraordinarily low interest rates, nonresidential construction spending growth has become an important supporting actor. Nonresidential spending, including on factories, hotels, office buildings and distribution centers, has continued to climb in the face of more readily available financing, lower retail and office vacancy rates and rising hotel occupancy rates.
"Though the U.S. economy refuses to boom, the pace of growth has been enough to allow the average contractor to secure more work at higher margins," said Basu. "Interestingly, the pace of hiring is not set to accelerate, which may be a partial reflection of the lack of appropriately skilled construction workers available for hire. The expectation is for construction compensation costs to continue to rise given expanding skills shortages, but apparently not by enough to preclude steadily expanding margins."
"While the decline in commodity prices has helped to slow construction in parts of the country, including in portions of Texas, Oklahoma and North Dakota, low fuel prices have induced faster investment elsewhere, including in the U.S. auto industry," said Basu. "The result appears to be that the average construction decision maker is more confident than six months ago when commodity prices were higher. A stronger U.S. dollar has served to suppress U.S. export growth, however, and business investment growth remains mediocre by historic standards. The implication is that the U.S. economy is not poised to break out anytime soon, and that stakeholders can continue to expect frustratingly unexceptional growth close to 2 to 2.5%."
To read more about the latest CCI, click here.
Related Stories
Codes and Standards | Mar 25, 2016
OSHA finalizes new silica dust regulations
Construction industry has until June 2017 to comply.
Contractors | Mar 24, 2016
ABC: Construction Backlog expands at the close of 2015
Uptick suggests high demand for construction workers will continue.
Market Data | Mar 1, 2016
ABC: Nonresidential spending regains momentum in January
Nonresidential construction spending expanded 2.5% on a monthly basis and 12.3% on a yearly basis, totaling $701.9 billion. Spending increased in January in 10 of 16 nonresidential construction sectors.
Market Data | Mar 1, 2016
Leopardo releases 2016 Construction Economics Report
This year’s report shows that spending in 2015 reached the highest level since the Great Recession. Total spending on U.S. construction grew 10.5% to $1.1 trillion, the largest year-over-year gain since 2007.
Market Data | Feb 26, 2016
JLL upbeat about construction through 2016
Its latest report cautions about ongoing cost increases related to finding skilled laborers.
Contractors | Feb 25, 2016
Huntsville’s Botanical Garden starts work on new Guest Welcome Center
The 30,000-sf facility will feature three rental spaces of varying sizes.
Architects | Feb 24, 2016
Is the booming freelance economy a threat to AEC firms?
By shifting the work (and revenue) to freelancers, “platform capitalism” startups have taken considerable market share from traditional businesses.
Religious Facilities | Feb 22, 2016
For the first time in Bulgaria, a temple’s construction raises a metal dome
The church is 2½ times larger than the basilica in Ukraine it references.
Market Data | Feb 10, 2016
Nonresidential building starts and spending should see solid gains in 2016: Gilbane report
But finding skilled workers continues to be a problem and could inflate a project's costs.
Contractors | Feb 2, 2016
ABC: Nonresidential spending falls again in December
For a second consecutive month, 12 of 16 nonresidential subsectors experienced spending decreases on a monthly basis.