Shop NRCA has the industry resources you need
News Sept. 16, 2020

Contractor confidence rose in August

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

All three components increased in August, and two of the three components were above the diffusion index threshold of 50. Contractors expect their profit margins to shrink during the next six months but are more optimistic compared with July. Staffing level expectations increased, with only 23% of contractors expecting to cut positions during the next six months.

In August, the Associated Builders and Contractors’ Construction Confidence Index increased from 47.2 to 53 for sales expectations; 42.7 to 47.8 for profit margin expectations; and 50.6 to 54.4 for staffing levels.

Additionally, ABC’s Construction Backlog Indicator rebounded to 8.0 months in August, an increase of 0.2 months from July’s reading.

“The construction backlog and confidence indicators both surprised to the upside in this report,” said ABC Chief Economist Anirban Basu. “Prior to August, the message emerging from these leading indicators was unequivocally negative, with contractors collectively indicating sharp declines in backlog and an expectation that both sales and profit margins would shrink in coming months. While there are many reasons to believe that the months ahead will present challenges for nonresidential construction—including tighter credit conditions, weak state and local government finances, and elevated commercial vacancy rates—the August data provided a much-needed respite from gloom and doom.

“Backlog and confidence are likely to be volatile during the month ahead,” Basu continued. “Many projects have been postponed, yet if they are quickly brought back to life as economic recovery persists, backlog could begin to rise. However, there is the possibility that many project postponements will eventually become cancellations, impacting both backlog and contractor confidence. For now, the expectation is that sales and industry employment will climb over the next six months, but that profit margins will remain under pressure.”

Advertisement

Subscribe for Updates Join 25,000+ roofing professionals following NRCA

Subscribe to NRCA