Construction industry leaders were less optimistic in October, according to Associated Builders and Contractors.
All three components of ABC’s Construction Confidence Index decreased for the month; however, they remained above the diffusion index threshold of 50.
In October, ABC’s Construction Confidence Index decreased from 62 to 58.7 for staffing levels; from 58.3 to 53.1 for sales expectations; and from 54 to 52.3 for profit margin expectations.
Additionally, ABC’s Construction Backlog Indicator decreased from nine months in September to 8.4 months in October, which is down 0.4 months from October 2022.
“While larger contractors continue to disproportionately benefit from a bevy of megaprojects around the nation, many smaller contractors are feeling the sting of weaker economic fundamentals in struggling commercial real estate segments,” said ABC Chief Economist Anirban Basu. “Smaller contractors are often the ones most dependent on developer-driven activity. With developers facing both higher borrowing costs and greater difficulty lining up project financing, backlog among some contractors is beginning to dissipate.
“This is precisely what ABC economists predicted,” Basu continued. “The vast majority of contractors could boast healthy backlog, especially those working in the manufacturing/industrial, infrastructure, data center and health care segments. But those tied to the office, shopping center and multifamily markets are likely experiencing difficulty lining up work. This helps explain declines in the readings for ABC’s Construction Confidence Index in all three dimensions: sales, employment and margins. Each of these readings, however, remains above 50, suggesting that while industry growth is softening, it has yet to enter contractionary territory.”