The latest Construction Confidence Index shows construction industry leaders were less confident in June regarding the nonresidential construction sector’s future, according to www.abc.org.
Although contractors were slightly less optimistic about sales, profit margins and staffing levels, all three components were well above the diffusion index threshold of 50. Nearly 67% of respondents expect sales to increase during the next six months. Additionally, more than 59% of contractors expect staffing levels to increase and 54% expect profit margins to expand.
In June, the CCI decreased from 70 to 65.3 for sales expectations; from 62.8 to 61.3 for profit margin expectations; and from 66.8 to 64.6 for staffing levels.
“Economists near and far are searching for signs of the next economic downturn,” says ABC Chief Economist Anirban Basu. “Among the signals are increasingly volatile financial markets, an inverted yield curve, unemployment that sits meaningfully below its natural rate and a variety of indicators suggesting that the global economy continues to soften. Many economists continue to predict recession within the next one to two years.
“Therefore, when there is positive news on the economy, whether in the form of solid job creation numbers, strong retail sales or the Construction Confidence Index, it is worth taking note,” Basu continues. “While many will continue to fret about the impacts of ongoing trade disputes, rising levels of indebtedness, Brexit, Iran and other forces, nonresidential construction is positioned to remain a driver of positive economic growth.”
Basu says current conditions and expectations indicate continued expansion.
“What is perhaps most impressive is the expectation that profit margins will continue to rise,” Basu says. “This is an indication that contractors continue to enjoy pricing power, helping to offset the impacts of rising wage pressures. Even with wages rising, more contractors expect to add people than to subtract them—another reason to believe that for now, the U.S. expansion remains firmly in place. This is further supported by indications that sales of nonresidential construction services continue to expand.”
