Non-residential builders' confidence is increasing

by Steve Randall23 Apr 2019

Confidence in non-residential construction gained in February according to a leading metric.

Associated Builders and Contractors’ Construction Confidence Index was higher across all three principal components measured by the survey- sales, profit margins, and staffing levels.

“Confidence seems to be making a comeback in America,” said ABC Chief Economist Anirban Basu. “There was a time when consumer, small business and investor confidence was falling. For now, that dynamic has evaporated, with job growth continuing and US equity prices heading higher of late.”

The index for sales expectations increased from 68.4 to 69.4 in February; for profit margin expectations the index increased from 60.6 to 63.3; and for staffing levels the index increased from 68.2 to 68.5.

Only 3.4% of contractors expect to reduce staffing levels over the next six months, and more than 70% of survey respondents expect their sales to increase through the initial half of 2019.

Workforce challenges
But 31.4% of contractors expect profit margins to remain unchanged, likely due in large measure to rising worker compensation costs, with workforce shortfalls making it harder for builders to meet time and budget demands.

“Despite expanding compensation costs, contractors expect to significantly increase staffing levels going forward, an indication that many busy contractors expect to get busier,” explained Basu. “The fact that the profit margin reading remains above 50 also suggests that contractors enjoy a degree of pricing power and are able to pass at least some of their higher costs along to customers. Slower growth in construction materials prices relative to last year represents another likely factor shaping survey results.”