Construction industry leaders’ confidence fell sharply in February amid expectations of economic fallout related to the COVID-19 crisis, according to www.abc.org.
All three components fell below the diffusion index threshold of 50 for the first ime in the history of the series. Less than 30% of respondents expect sales to expand during the next six months, and less than 20% expect profit margins to expand.
In February, the CCI decreased from 68.3 to 38.1 for sales expectations; 61.9 to 36.6 for profit margin expectations; and from 69 to 45.2 for staffing levels.
“In the course of a month, construction industry confidence has shifted from ecstatic to utterly dismayed,” says ABC Chief Economist Anirban Basu. “If anything, confidence is likely to decline further as construction industry leaders come to terms with the full extent of the COVID-19 crisis. The finances of key sources of demand for construction services, including commercial real estate investment trusts, state and local governments, retailers and hoteliers, have been savaged by the crisis, translating into fewer funds available to finance construction.
“Normally, construction activity is partially shielded from the initial stages of downturn due to the presence of backlog, which stood at 8.2 months as of February 2020,” Basu continues. “But this time is at least somewhat different, with certain construction activities halted in California, Pennsylvania, Massachusetts and elsewhere. While construction will hold up better in the near-term than retail, restaurants, airlines, auto manufacturing, lodging and a number of other key industries, its recovery is also likely to be less profound than in these other segments absent a federal infrastructure-oriented stimulus package.”
