Construction industry leaders remained confident regarding the nonresidential construction sector’s prospects during January 2019, according to the latest Construction Confidence Index recently released by Associated Builders and Contractors.
Expectations for sales during the coming six-month period remained especially upbeat in January, with nearly 70% of respondents anticipating an increase in sales levels. A similar level of confidence characterizes contractors expectations on future staffing levels, with fewer than 7% of contractors indicating expectations of shrinking workforces.
While contractors became fractionally less confident regarding profit margins, more than half of respondents still expect their margins to increase in coming months, while less than 13% expect margins to shrink. All three principal components measured by the survey—sales, profit margins, and staffing levels—remain well above the diffusion index threshold of 50, signaling ongoing expansion in construction activity.
– The CCI for sales expectations increased from 67.2 to 68.4 in January.
– The CCI for profit margin expectations fell from 60.6 to 60.5.
– The CCI for staffing levels increased from 66.2 to 68.2.
“Indications of ongoing confidence in the construction sector have become more important," said ABC Chief Economist Anirban Basu. “Recent dips in consumer and small-business confidence have become a source of concern, as have weak reports regarding employment growth and retail sales. Thankfully, contractors continue to exhibit elevated levels of confidence regarding the near-term trajectory of the economy despite ongoing workforce shortages. Not only do contractors expect to further expand staffing levels, many continue to expect rising profit margins despite rapidly expanding payroll expenses.
“One source of relief has been a recent moderation in construction materials prices,” said Basu. “With the global economy continuing to soften, materials prices should remain well-behaved over the months to come. Investors continue to aggressively seek ways to deploy capital, including on new commercial construction. This helps explain a recent surge in the Architecture Billings Index, another leading indicator that, along with CCI, suggests ongoing economic momentum throughout the first half of 2019.”
CCI is a diffusion index. Readings above 50 indicate growth, while readings below 50 are unfavorable.
[Editor’s note: ABC’s Construction Confidence Index will be reported monthly beginning with January 2019 data. This is the first monthly CCI release.]
Related Stories
Market Data | Nov 22, 2019
Architecture Billings Index rebounds after two down months
The Architecture Billings Index (ABI) score in October is 52.0.
Market Data | Nov 14, 2019
Construction input prices unchanged in October
Nonresidential construction input prices fell 0.1% for the month and are down 2.0% compared to the same time last year.
Multifamily Housing | Nov 7, 2019
Multifamily construction market remains strong heading into 2020
Fewer than one in 10 AEC firms doing multifamily work reported a decrease in proposal activity in Q3 2019, according to a PSMJ report.
Market Data | Nov 5, 2019
Construction and real estate industry deals in September 2019 total $21.7bn globally
In terms of number of deals, the sector saw a drop of 4.4% over the last 12-month average.
Market Data | Nov 4, 2019
Nonresidential construction spending rebounds slightly in September
Private nonresidential spending fell 0.3% on a monthly basis and is down 5.7% compared to the same time last year.
Market Data | Nov 1, 2019
GDP growth expands despite reduction in nonresident investment
The annual rate for nonresidential fixed investment in structures declined 15.3% in the third quarter.
Market Data | Oct 24, 2019
Architecture Billings Index downturn moderates as challenging conditions continue
The Architecture Billings Index (ABI) score in September is 49.7.
Market Data | Oct 23, 2019
ABC’s Construction Backlog Indicator rebounds in August
The primary issue for most contractors is not a lack of demand, but an ongoing and worsening shortage of skilled workers available to meet contractual requirements.
Multifamily Housing | Oct 16, 2019
A new study wonders how many retiring adults will be able to afford housing
Harvard’s Joint Center for Housing Studies focuses on growing income disparities among people 50 or older.
Market Data | Oct 9, 2019
Two ULI reports foresee a solid real estate market through 2021
Market watchers, though, caution about a “surfeit” of investment creating a bubble.