Construction industry leaders remained confident in April, according to Associated Builders and Contractors.
Two of three components of ABC’s Construction Confidence Index decreased for the month but all remained above the diffusion index threshold of 50.
In April, ABC’s Construction Confidence Index increased from 63.3 to 64.2 for staffing levels. The index decreased from 61.9 to 59.7 for sales expectations and from 52.4 to 52.3 for profit margin expectations.
Additionally, ABC’s Construction Backlog Indicator increased from 8.2 months in March to 8.4 months in April, which is down 0.5 months from April 2023.
“The Federal Reserve began ratcheting up interest rates more than two years ago but one would not know it based on construction confidence and backlog,” said ABC Chief Economist Anirban Basu. “ABC measurements reflect ongoing momentum in the nation’s nonresidential construction sector. While there are occasional hints of softness in certain segments and over certain periods, the average contractor continues to report solid backlog and a belief that sales, employment and profit margins will expand over the next six months.
“Time will tell whether this optimism is justified,” Basu continued. “Coming into the year, many expected that interest rates would fall markedly in 2024. Given stubbornly elevated inflation, that will not occur. Project financing costs are poised to remain higher for longer. Project cancellations and postponements have been on the rise. Moreover, a new set of supply chain issues has emerged, driving up materials costs and prospectively weakening industry margins. Workers also are becoming more expensive, in part because the construction wage premium has shrunk over the past several years due to rapidly rising compensation levels in competing segments like logistics and retail. The implication is that construction compensation levels will need to rise for the industry to be able to staff up more fully."
