Construction contractors remained confident during the second quarter of 2018, according to the latest Construction Confidence Index released today by Associated Builders and Contractors.
More than three in four construction firms expect that sales will continue to rise over the next six months, while three in five expect higher profit margins. More than seven in 10 expect to bolster staffing levels, though that proportion has fallen relative to the previous quarter, perhaps in part due to the skilled labor shortage in the United States. All three key 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 survey found:
- CCI for sales expectations increased from 72.2 to 72.6 during the second quarter of 2018.
- CCI for profit margin expectations increased from 63.4 to 64.5.
- CCI for staffing levels decreased from 70.2 to 69.5 but remains elevated by historical standards.
“The U.S. economy remains steady, creating opportunities for general and subcontractors alike,” said ABC Chief Economist Anirban Basu. “Recently, infrastructure has been one of the primary drivers and, despite the absence of a federal infrastructure package, state and local governments have expanded their capital outlays. A number of states are also now running hefty budget surpluses, creating the capital and confidence necessary to drive public construction forward. As evidence, construction spending in the water supply category is up 29% on a year-over-year basis, conservation and development (e.g. flood control) by 24%, transportation by nearly 21%, public safety-related spending by 17%, and sewage and waste disposal by 11%.
“The confidence expressed by contractors is consistent with a number of other leading indicators, including the Architecture Billings Index and ABC’s Construction Backlog Indicator,” said Basu. “With financial markets surging, the nation producing a record number of available job openings, and both consumer and business confidence elevated, chances for a significant slowdown in nonresidential construction activity in late 2018 and into 2019 are remote. That helps explain why only about 6% of contractors expect sales to decline over the next six months.
“The longer-term outlook is not as clear,” said Basu. “Interest rates are rising, construction workers and materials have become more expensive and asset prices have become further elevated and therefore increasingly vulnerable to correction. There is also some evidence of overbuilding in certain real estate segments in some communities. Tariff increases and associated retaliation serve as yet another threat to longer-term economic momentum, as do faltering government pension funds. But for now, construction firms can expect to remain busy improving the nation’s built environment. A shortage of skilled workers remains the primary issue, which is expected to continue as more workers retire and insufficient workers join the skilled construction trades.”
CCI is a diffusion index. Readings above 50 indicate growth, while readings below 50 are unfavorable.
Related Stories
Market Data | Sep 3, 2020
6 must reads for the AEC industry today: September 3, 2020
New affordable housing comes to the Bronx and California releases guide for state water policy.
Market Data | Sep 2, 2020
Coronavirus has caused significant construction project delays and cancellations
Yet demand for skilled labor is high, new survey finds.
Market Data | Sep 2, 2020
5 must reads for the AEC industry today: September 2, 2020
Precast concrete tower honors United AIrlines Flight 93 victims and public and private nonresidential construction spending slumps.
Market Data | Sep 2, 2020
Public and private nonresidential construction spending slumps in July
Industry employment declines from July 2019 in two-thirds of metros.
Market Data | Aug 31, 2020
5 must reads for the AEC industry today: August 31, 2020
The world's first LEED Platinum integrated campus and reopening campus performance arts centers.
Market Data | Aug 21, 2020
5 must reads for the AEC industry today: August 21, 2020
Student housing in the COVID-19 era and wariness of elevators may stymie office reopening.
Market Data | Aug 20, 2020
6 must reads for the AEC industry today: August 20, 2020
Japan takes on the public restroom and a look at the evolution of retail.
Market Data | Aug 19, 2020
6 must reads for the AEC industry today: August 19, 2020
July architectural billings remained stalled and Florida becomes third state to adopt concrete repair code.
Market Data | Aug 18, 2020
July architectural billings remained stalled
Clients showed reluctance to sign contracts for new design projects during July.
Market Data | Aug 18, 2020
Nonresidential construction industry won’t start growing again until next year’s third quarter
But labor and materials costs are already coming down, according to latest JLL report.