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News Aug. 18, 2020

Contractor confidence declines in July

Construction industry leaders’ confidence fell in July amid the COVID-19 crisis, according to www.abc.org.

All three components decreased in July, and two of the three components remain below the diffusion index threshold of 50. Less than 29% of contractors expect their profit margins to increase during the next six months, and more than 47% expect shrinking profit margins during that period.

In July, the CCI decreased from 51.1 to 47.2 for sales expectations; 47 to 42.7 for profit margin expectations; and 56 to 50.6 for staffing levels.

“Many contractors are quickly working through existing backlog,” said ABC Chief Economist Anirban Basu. “Because the virus remains deeply problematic and many communities are rolling back reopening plans, the partial economic rebound observed in May and June is set to flatten. The implication is that while many contractors will continue to work through backlog for the balance of 2020, it may be difficult to secure work for 2021, as fewer projects are bid out and project starts become increasingly rare.

“There are exceptions, of course,” Basu continued. “Backlog in the heavy industrial category has increased and many contractors are reporting more activity in fulfillment and data center construction as the e-commerce boom persists. But with project financing becoming increasingly challenging and with state and local governments in rough fiscal shape, the nonresidential construction environment is not shaping up to be a positive one, absent a meaningful infrastructure package.”

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