Confidence among U.S. construction industry leaders plummeted in February due to expectations of the economic fallout associated with COVID-19, according to the Associated Builders and Contractors Construction Confidence Index released today. Readings for sales, profit margins and staffing levels expectations fell below the threshold of 50 for the first time in the history of the series, signaling expected contraction along all three dimensions.
As of February 2020, fewer than 30% of contractors expected their sales to increase over the next six months, while less than 20% of contractors expected their profit margins to increase. More than one in five contractors expect a significant decrease in profit margins, while one in four expect a significant decline in sales volumes.
- The CCI for sales expectations decreased from 68.3 to 38.1 in February.
- The CCI for profit margin expectations decreased from 61.9 to 36.6.
- The CCI for staffing levels decreased from 69 to 45.2.
“In the course of a month, construction industry confidence has shifted from ecstatic to utterly dismayed,” said ABC Chief Economist Anirban Basu. “If anything, confidence is likely to decline further as construction industry leaders come to terms with the full extent of the COVID-19 crisis. The finances of key sources of demand for construction services, including commercial real estate investment trusts, state and local governments, retailers and hoteliers, have been savaged by the crisis, translating into fewer funds available to finance construction.
“Normally, construction activity is partially shielded from the initial stages of downturn due to the presence of backlog, which stood at 8.2 months as of February 2020,” said Basu. “But this time is at least somewhat different, with certain construction activities halted in California, Pennsylvania, Massachusetts and elsewhere. While construction will hold up better in the near-term than retail, restaurants, airlines, auto manufacturing, lodging and a number of other key industries, its recovery is also likely to be less profound than in these other segments absent a federal infrastructure-oriented stimulus package.”
CCI is a diffusion index. Readings above 50 indicate growth, while readings below 50 are unfavorable.
Related Stories
Market Data | Jul 31, 2017
U.S. economic growth accelerates in second quarter; Nonresidential fixed investment maintains momentum
Nonresidential fixed investment, a category of GDP embodying nonresidential construction activity, expanded at a 5.2% seasonally adjusted annual rate.
Multifamily Housing | Jul 27, 2017
Apartment market index: Business conditions soften, but still solid
Despite some softness at the high end of the apartment market, demand for apartments will continue to be substantial for years to come, according to the National Multifamily Housing Council.
Market Data | Jul 25, 2017
What's your employer value proposition?
Hiring and retaining talent is one of the top challenges faced by most professional services firms.
Market Data | Jul 25, 2017
Moderating economic growth triggers construction forecast downgrade for 2017 and 2018
Prospects for the construction industry have weakened with developments over the first half of the year.
Industry Research | Jul 6, 2017
The four types of strategic real estate amenities
From swimming pools to pirate ships, amenities (even crazy ones) aren’t just perks, but assets to enhance performance.
Market Data | Jun 29, 2017
Silicon Valley, Long Island among the priciest places for office fitouts
Coming out on top as the most expensive market to build out an office is Silicon Valley, Calif., with an out-of-pocket cost of $199.22.
Market Data | Jun 26, 2017
Construction disputes were slightly less contentious last year
But poorly written and administered contracts are still problems, says latest Arcadis report.
Industry Research | Jun 26, 2017
Time to earn an architecture license continues to drop
This trend is driven by candidates completing the experience and examination programs concurrently and more quickly.
Industry Research | Jun 22, 2017
ABC's Construction Backlog Indicator rebounds in 2017
The first quarter showed gains in all categories.
Market Data | Jun 21, 2017
Design billings maintain solid footing, strong momentum reflected in project inquiries/design contracts
Balanced growth results in billings gains in all sectors.