Construction industry leaders remained confident regarding nonresidential construction prospects in February 2019, according to the latest Construction Confidence Index released by Associated Builders and Contractors.
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.
Only 3.4% of contractors expect to reduce staffing levels over the next six months, and more than 70% of survey respondents expect their sales to increase through the initial half of 2019.
Still, 31.4% of contractors expect profit margins to remain unchanged, likely due in large measure to rising worker compensation costs.
Index breakdown:
• The CCI for sales expectations increased from 68.4 to 69.4 in February.
• The CCI for profit margin expectations increased from 60.6 to 63.3.
• The CCI for staffing levels increased from 68.2 to 68.5.
“Confidence seems to be making a comeback in America,” said ABC Chief Economist Anirban Basu. “There was a time when consumer, small business and investor confidence was falling. For now, that dynamic has evaporated, with job growth continuing and U.S. equity prices heading higher of late. Contractors understand the performance of the broader economy today helps shape the construction environment of tomorrow. Accordingly, with strong economic data like the Construction Backlog Indicator—which stood at 8.8 months in February 2019—and nonresidential construction spending, which increased 4.8% year over year, contractor confidence remains elevated.
“That said, contractors continue to wrestle with ever-larger skilled workforce shortfalls, which are making it more difficult to deliver construction services on time and on budget,” said Basu. “This helps explain why the CCI reading for profit margins remains meaningfully lower than the corresponding reading for sales expectations. Despite expanding compensation costs, contractors expect to significantly increase staffing levels going forward, an indication that many busy contractors expect to get busier. The fact that the profit margin reading remains above 50 also suggests that contractors enjoy a degree of pricing power and are able to pass at least some of their higher costs along to customers. Slower growth in construction materials prices relative to last year represents another likely factor shaping survey results.”
CCI is a diffusion index. Readings above 50 indicate growth, while readings below 50 are unfavorable.
Related Stories
Market Data | Sep 22, 2016
Architecture Billings Index slips, overall outlook remains positive
Business conditions are slumping in the Northeast.
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.