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
Designers | Oct 19, 2022
Architecture Billings Index moderates but remains healthy
For the twentieth consecutive month architecture firms reported increasing demand for design services in September, according to a new report today from The American Institute of Architects (AIA).
Market Data | Oct 17, 2022
Calling all AEC professionals! BD+C editors need your expertise for our 2023 market forecast survey
The BD+C editorial team needs your help with an important research project. We are conducting research to understand the current state of the U.S. design and construction industry.
Market Data | Oct 14, 2022
ABC’s Construction Backlog Indicator Jumps in September; Contractor Confidence Remains Steady
Associated Builders and Contractors reports today that its Construction Backlog Indicator increased to 9.0 months in September, according to an ABC member survey conducted Sept. 20 to Oct. 5.
Market Data | Oct 12, 2022
ABC: Construction Input Prices Inched Down in September; Up 41% Since February 2020
Construction input prices dipped 0.1% in September compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics’ Producer Price Index data released today.
Laboratories | Oct 5, 2022
Bigger is better for a maturing life sciences sector
CRB's latest report predicts more diversification and vertical integration in research and production.
Market Data | Aug 25, 2022
‘Disruptions’ will moderate construction spending through next year
JLL’s latest outlook predicts continued pricing volatility due to shortages in materials and labor
Market Data | Aug 2, 2022
Nonresidential construction spending falls 0.5% in June, says ABC
National nonresidential construction spending was down by 0.5% in June, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau.
Market Data | Jul 28, 2022
The latest Beck Group report sees earlier project collaboration as one way out of the inflation/supply chain malaise
In the first six months of 2022, quarter-to-quarter inflation for construction materials showed signs of easing, but only slightly.
Hotel Facilities | Jul 28, 2022
As travel returns, U.S. hotel construction pipeline growth follows
According to the recently released United States Construction Pipeline Trend Report from Lodging Econometrics (LE), the total U.S. construction pipeline stands at 5,220 projects/621,268 rooms at the close of 2022’s second quarter, up 9% Year-Over-Year (YOY) by projects and 4% YOY by rooms.
Codes and Standards | Jul 22, 2022
Hurricane-resistant construction may be greatly undervalued
New research led by an MIT graduate student at the school’s Concrete Sustainability Hub suggests that the value of buildings constructed to resist wind damage in hurricanes may be significantly underestimated.