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
Sponsored | | Nov 12, 2014
Williams Scotsman plugs into the jobsite
Many of our customers conduct important business from their temporary modular jobsite office and most require access to technology to get their job done effectively and efficiently. SPONSORED CONTENT
| Nov 12, 2014
Chesapeake Bay Foundation completes uber-green Brock Environmental Center, targets Living Building certification
More than a decade after opening its groundbreaking Philip Merrill Environmental Center, the group is back at it with a structure designed to be net-zero water, net-zero energy, and net-zero waste.
| Nov 12, 2014
Forbes: Houston is America's #1 construction hotspot
A new list of America's 20 biggest boomtowns shows Houston on top, with New York City close behind, followed by Dallas, Washington, D.C., and Los Angeles.
| Nov 11, 2014
Renzo Piano's third building at London Bridge Quarter approved, will be built adjacent to the Shard
Renzo Piano Building Workshop has been granted planning approval for its residential building at London Bridge Quarter—a 26-story apartment tower dubbed Feilden House.
| Nov 10, 2014
Herzog & De Meuron unveils plan for National Library of Israel
The library’s new home will be a completely new building in Jerusalem, and will combine the functions of a central research center, a venue for indoor and outdoor cultural and educational activities, and a place for digital experience.
| Nov 10, 2014
Hotel construction pipeline hits five-year high
The hotel construction pipeline hit a five-year high in the third quarter, clocking in at 3,516 projects and 443,936 rooms, Lodging Econometrics reports.
| Nov 7, 2014
Arts college uses creative financing to build 493-bed student housing
Many states have cut back funding for higher education in recent years, and securing money for new housing has been tougher than ever for many colleges and universities. A recent residence hall project in Boston involving three colleges provides an inspiring example of how necessity can spawn invention in financing strategies.
| Nov 7, 2014
World's best new skyscraper: Sydney's vegetated One Central Park honored by CTBUH
The Jean Nouvel-designed tower tops the list of 88 entries in the 13th annual Council on Tall Buildings and Urban Habitat Awards.
| Nov 6, 2014
Hines planning tall wood office building in Minneapolis
The Houston-based developer is planning a seven-story wood-framed office building in Minneapolis’ North Loop that will respect the neighborhood’s historic warehouse district look.
| Nov 6, 2014
Studio Gang Architects will convert power plant into college recreation center
The century-old power plant will be converted into a recreation facility with a coffee shop, lounges, club rooms, a conference center, lecture hall, and theater, according to designboom.