Contractors regain confidence in January

March 25, 2019

The latest Construction Confidence Index (CCI) shows construction industry leaders were confident in January regarding the nonresidential construction sector's future, according to

Expectations for sales during the next six months remained especially positive, with nearly 70 percent of respondents anticipating an increase in sales levels. Contractors also were optimistic about future staffing levels; fewer than 7 percent of contractors indicated expectations of shrinking workforces.

Although contractors were slightly less confident regarding profit margins, more than half of respondents still expect their margins to increase in coming months, and less than 13 percent expect margins to decrease.

All three principal components measured by the survey—sales, profit margins and staffing levels—remain well above the diffusion index threshold of 50, signaling continued expansion in construction activity. In January, the CCI increased from 67.2 to 68.4 for sales expectations; fell from 60.6 to 60.5 for profit margin expectations; and increased from 66.2 to 68.2 for staffing levels.

"Indications of ongoing confidence in the construction sector have become more important," says ABC Chief Economist Anirban Basu. "Recent dips in consumer and small-business confidence have become a source of concern, as have weak reports regarding employment growth and retail sales. Thankfully, contractors continue to exhibit elevated levels of confidence regarding the near-term trajectory of the economy despite ongoing workforce shortages. Not only do contractors expect to further expand staffing levels, many continue to expect rising profit margins despite rapidly expanding payroll expenses.

"One source of relief has been a recent moderation in construction materials prices," Basu continues. "With the global economy continuing to soften, materials prices should remain well-behaved over the months to come. Investors continue to aggressively seek ways to deploy capital, including on new commercial construction. This helps explain a recent surge in the Architecture Billings Index, another leading indicator that, along with CCI, suggests ongoing economic momentum throughout the first half of 2019."