Construction industry leaders’ confidence fell in July, according to www.abc.org.
All three components declined for the month; sales expectations and staffing levels remained above the diffusion index threshold of 50, and profit margins fell below 50 for the second consecutive month.
In July, the Associated Builders and Contractors’ Construction Confidence Index decreased from 58.3 to 55.2 for sales expectations; 59.6 to 57.5 for staffing levels; and 49.4 to 47.5 for profit margin expectations.
Additionally, ABC’s Construction Backlog Indicator decreased from 8.9 months in June to 8.7 months in July.
“The level of construction activity has begun to fade,” said ABC Chief Economist Anirban Basu. “While the average contractor still expects employment and sales to climb over the next six months, the current pace of expansion is poised to be slower than earlier stages of economic recovery. Higher borrowing costs, weak commercial real estate fundamentals and the reluctance of many project owners to bear the full brunt of higher construction materials prices and rising compensation costs are pushing profit margins lower and driving pessimism higher. The average contractor expects margins to shrink over the next six months.
“A growing number of contractors are preparing for tougher times ahead,” Basu continued. “That is nothing new for an industry that has proven itself to be highly resilient and cyclical in recent decades. Nonetheless, for now, many contractors continue to operate at capacity and are actively looking to hire additional workers to expand capacity. It is simply too soon to conclude that the nonresidential construction industry has entered recession despite recent declines in backlog.”
