The latest Construction Confidence Index shows construction industry leaders remained confident in May regarding the nonresidential construction sector’s future, according to www.abc.org.
Although contractors were slightly less optimistic about profit margins and staffing levels, 68% of respondents expect to increase staffing levels during the next six months. Additionally, nearly 73% of contractors expect sales to increase during the next six months.
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 May, the CCI increased from 68.4 to 70 for sales expectations; decreased from 63 to 62.8 for profit margin expectations; and decreased from 67.4 to 66.8 for staffing levels.
“While there continues to be considerable chatter regarding a slowing economy, the need for federal rate cuts and the damaging effects of ongoing trade disputes involving the United States, China, the European Union and India, among others, nonresidential firm leaders continue to expect further construction spending growth,” says ABC Chief Economist Anirban Basu. “Recent data regarding job growth and consumer spending indicate that any economic slowing to date has been mild and that the expansion is set to endure for the next few quarters.
“While profit margin expectations and staffing levels measures declined slightly in May, they remained well above the threshold level of 50,” Basu continues. “More importantly, these CCI measures likely declined due to economic strength rather than weakness. Firms continue to scramble for talent in the context of an economy offering more job openings than jobseekers. As a result, staffing levels cannot rise rapidly even in the context of elevated demand for workers, and profit margins are negatively impacted by the accompanying rapid rise in compensation costs. However, far more industry leaders expect profit margins to rise than decline.”
