Construction industry confidence index slips

U.S. construction industry leaders’ confidence about sales, profits and staffing levelsfell slightly in July 2019, according to a national survey.

Nonetheless, respondents to the Construction Confidence Index (CCI) remain optimistic about the near-term prospects for nonresidential projects.

The survey by the trade association Associated Builders and Contractors found that, for a third consecutive month, contractor confidence declined:

• The CCI for sales expectations decreased from 65.3 in July to 64.8 to August.
• The CCI for profit margin expectations fell from 61.3 to 60.
• The CCI for staffing levels fell from 64.6 to 63.3.

However, more than 60% of respondents expect sales to increase in next six months, while more than 56% expect staffing levels to increase, and 52% expect profit margins to expand. 

Readings above 50 indicate growth, while readings below 50 are unfavorable.

“Contractor confidence is behaving as expected during the latter stages of a construction spending cycle,” ABC chief economist Anirban Basu said in a statement. “While the average American nonresidential contractor remains busy, according to ABC’s latest Construction Backlog Indicator, the July CCI data suggests an oncoming inflection point in trends. And based on available construction spending data, some softening in the pace of growth has already begun.”

Nonetheless, Basu said, “the near-term remains bright.”

“While the greatest challenge for many contractors remains completing work under contract given significant skills shortages, contractors collectively expect to continue to expand staffing levels in the context of increasing sales,” he said. “Perhaps most impressively, despite rapidly growing compensation costs, the average contractor expects that profit margins will continue to rise over the next six months, consistent with a substantial appetite for construction services for the balance of the current year and into 2020.”