Construction industry leaders mainly were confident about the nonresidential construction sector's prospects during the fourth quarter of 2018, according to www.abc.org.
The latest Construction Confidence Index (CCI) released by Associated Builders and Contractors (ABC) shows sales expectations remained especially upbeat during the fourth quarter; however, the proportion of contractors anticipating significant sales increases during the following two quarters fell by five percentage points. Still, more than 67 percent of contractors projected rising sales, and slightly less than 12 percent expected sales to decrease.
About 50 percent of contractors anticipate their profit margins will grow during the first half of 2019, and only 10 percent expect their profit margins to decline, even with rising labor costs. Additionally, more than 60 percent of contractors expect to increase staffing levels during upcoming quarters.
Despite a tumultuous fourth quarter in 2018 for the financial markets, all three key components measured by the survey—sales, profit margins and staffing levels—are well above the diffusion index threshold of 50, signaling continued expansion in construction activity. The CCI for sales expectations fell from 68.6 to 67.2 during the fourth quarter of 2018; the CCI for profit margin expectations dropped from 63.6 to 60.6; and the CCI for staffing levels decreased from 68.6 to 66.2.
"Despite rising materials costs, an ongoing skills shortage and higher borrowing costs, CCI continues to indicate optimism in America's construction sector," says ABC Chief Economist Anirban Basu. "Construction industry leaders expect profit margins will hold up well during the first half of 2019 despite these rising costs, which speaks to the ongoing strong demand for construction services.
"This is especially important as a number of other indicators have reported waning confidence, such as the University of Michigan's Consumer Sentiment Survey and NFIB's Small Business Optimism Index," Basu continues. "While risks remain, this suggests the nation's nonresidential construction segment remains more stable than others. However, there are many unknown factors, including trade negotiations, rising interest rates and the potential for comprehensive infrastructure spending, which can have a significant impact on contractor confidence this year."
