The latest Construction Confidence Index shows construction industry leaders remained optimistic in December 2019 regarding the nonresidential construction sector’s future, according to www.abc.org.
All three components were well above the diffusion index threshold of 50. Seventy percent of respondents expect sales to expand during the next six months. Additionally, nearly the same percentage of contractors expect staffing levels to expand, and nearly half expect profit margins to expand.
In December 2019, the CCI decreased from 69.5 to 68.8 for sales expectations; decreased from 61.3 to 60 for profit margin expectations; and increased from 66.9 to 67.2 for staffing levels.
“The U.S. economy is humming, and among the principal beneficiaries of that performance are nonresidential contractors,” says ABC Chief Economist Anirban Basu. “Sales expectations, despite inching a bit lower in December, remain especially robust, with seven in 10 survey respondents expecting sales increases and fewer than one in 10 expecting their sales to decline during the first half of 2020. Recently released data regarding construction spending and hiring in the U.S. strongly suggest that this confidence is justified. ABC’s Construction Backlog Indicator dipped in December but still indicates that contractors remain busy.
“Despite broad optimism regarding sales prospects, contractors’ expectations are somewhat more subdued regarding profit margins,” Basu continues. “Though materials prices have been generally stable and energy prices have declined recently, workers are becoming more expensive, both in terms of wages and benefits. Shortfalls in the skilled trades are apparent throughout the nation, especially in the booming markets of the South and West. With U.S. unemployment hovering near a 50-year low, many construction workers may find opportunities in other segments, including logistics, and retirement rates remain elevated. All of this translates into ongoing increases in compensation costs and a squeeze on margins.”
