Construction contractors remained confident during the second quarter of 2018, according to www.abc.org.
The latest Construction Confidence Index (CCI) released by Associated Builders and Contractors (ABC) shows more than three in four construction firms expect sales will continue to rise during the next six months, and three in five firms expect higher profit margins. More than seven in 10 firms expect to boost staffing levels, though that number has fallen relative to the previous quarter, likely in part because of the industry's skilled labor shortage.
CCI is a diffusion index; readings above 50 indicate growth, and readings below 50 are unfavorable. All three key components measured by the survey—sales, profit margins and staffing levels—are well above the diffusion index threshold of 50, signaling ongoing expansion in construction activity. The survey found the CCI for sales expectations increased from 72.2 to 72.6 during the second quarter of 2018; CCI for profit margin expectations increased from 63.4 to 64.5; and CCI for staffing levels decreased from 70.2 to 69.5 but remains elevated by historical standards.
"The confidence expressed by contractors is consistent with a number of other leading indicators, including the Architecture Billings Index and ABC's Construction Backlog Indicator," says ABC Chief Economist Anirban Basu. "With financial markets surging, the nation producing a record number of available job openings, and both consumer and business confidence elevated, chances for a significant slowdown in nonresidential construction activity in late 2018 and into 2019 are remote. That helps explain why only about six percent of contractors expect sales to decline over the next six months.
"The longer-term outlook is not as clear," Basu continues. "Interest rates are rising, construction workers and materials have become more expensive, and asset prices have become further elevated and therefore increasingly vulnerable to correction. There is also some evidence of overbuilding in certain real estate segments in some communities. Tariff increases and associated retaliation serve as yet another threat to longer-term economic momentum, as do faltering government pension funds. But for now, construction firms can expect to remain busy improving the nation's built environment. A shortage of skilled workers remains the primary issue, which is expected to continue as more workers retire and insufficient workers join the skilled construction trades."
