The latest Construction Confidence Index shows construction industry leaders remained confident in March regarding the nonresidential construction sector's future, according to www.abc.org.
Although contractors were slightly less optimistic about profit margins and staffing levels, more than 70% of respondents expect to increase staffing levels during the next six months. Additionally, more than 56% of contractors expect profit margins to increase.
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 March, the CCI increased from 69.4 to 69.6 for sales expectations; decreased from 63.3 to 61.8 for profit margin expectations; and decreased from 68.5 to 67.8 for staffing levels.
"Last year, the U.S. economy grew 2.9%, and it expanded an additional 3.2% during the first quarter of 2019," says ABC Chief Economist Anirban Basu. "All of this is consistent with the notion that demand for nonresidential construction services will remain elevated for the foreseeable future. The CCI findings are also consistent with ABC's latest Construction Backlog Indicator report, which revealed that many contractors have a growing number of projects in their pipeline.
"A major source of influence on the data is the reemergence of public construction spending," Basu continues. "With nearly 10 years of economic expansion complete, many state and local governments are experiencing their best fiscal health in years, resulting in more funds to invest in roads, transit systems, schools, fire stations and police stations. The combination of spending growth in certain private construction categories and rising infrastructure outlays will keep the average American nonresidential contractor scrambling to retain and recruit workers, especially in the context of a national rate of unemployment effectively at a 50-year low."
Basu points out the recent trade dispute could affect contractor confidence.
"It should be noted that the most recent CCI survey was completed prior to the turmoil associated with the trade dispute between the United States and China, which may impact contractor confidence," Basu says. "While global investors have exhibited concern, most construction activity involves U.S.-based enterprises providing services to U.S.-based customers, minimizing unease. That said, the imposition of tariffs has the potential to raise costs of equipment and other inputs, which could at least conceivably impact profit margins. Moreover, market turmoil can truncate the availability of financing to prospective construction projects."
