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 | Sep 20, 2016
Backlog skyrockets for largest firms during second quarter, but falls to 8.5 months overall
While a handful of commercial construction segments continue to be associated with expanding volumes, for the most part, the average contractor is no longer getting busier, says ABC Chief Economist Anirban Basu.
Designers | Sep 13, 2016
5 trends propelling a new era of food halls
Food halls have not only become an economical solution for restauranteurs and chefs experiencing skyrocketing retail prices and rents in large cities, but they also tap into our increased interest in gourmet locally sourced food, writes Gensler's Toshi Kasai.
Building Team | Sep 6, 2016
Letting your resource take center stage: A guide to thoughtful site selection for interpretive centers
Thoughtful site selection is never about one factor, but rather a confluence of several components that ultimately present trade-offs for the owner.
Market Data | Sep 2, 2016
Nonresidential spending inches lower in July while June data is upwardly revised to eight-year record
Nonresidential construction spending has been suppressed over the last year or so with the primary factor being the lack of momentum in public spending.
Industry Research | Sep 1, 2016
CannonDesign releases infographic to better help universities obtain more R&D funding
CannonDesign releases infographic to better help universities obtain more R&D funding.
Industry Research | Aug 25, 2016
Building bonds: The role of 'trusted advisor' is earned not acquired
A trusted advisor acts as a guiding partner over the full course of a professional relationship.
Multifamily Housing | Aug 17, 2016
A new research platform launches for a data-deprived multifamily sector
The list of leading developers, owners, and property managers that are funding the NMHC Research Foundation speaks to the information gap it hopes to fill.
Hotel Facilities | Aug 17, 2016
Hotel construction continues to flourish in major cities
But concerns about overbuilding persist.
Market Data | Aug 16, 2016
Leading economists predict construction industry growth through 2017
The Chief Economists for ABC, AIA, and NAHB all see the construction industry continuing to expand over the next year and a half.
Multifamily Housing | Aug 12, 2016
Apartment completions in largest metros on pace to increase by 50% in 2016
Texas is leading this multifamily construction boom, according to latest RENTCafé estimates.
