ABC reports surge in construction contractor confidence

Confidence among U.S. construction industry leaders increased in November 2019 with respect to sales, profit margins and staffing, according to the Associated Builders and Contractors (ABC) Confidence Index released Jan. 23. Sales and profit margin expectations reached their highest levels since May 2019, while staffing expectations reached their highest level since April 2019.

“The U.S. economy retains significant momentum entering 2020,” says Anirban Basu, ABC’s chief economist. “Accordingly, the nonresidential construction outlook remains stable. The duration of the economic expansion—already record-shattering—has more room to run. ABC’s Construction Backlog Indicator remained virtually unchanged at 8.8 months in November, and with job growth still apparent, demand for office and other forms of commercial construction will persist.”

Three-quarters of contractors expect sales to rise over the next six months and, as a result, nearly 65 percent expect to increase their staffing levels, indicating that the average contractor will face even greater challenges recruiting and retaining talent through the first half of 2020.

More than 50 percent of contractors expect their profit margins to increase over the next six months for the first time since August 2019. Fewer than 12 percent expect margins to decline, strongly suggesting that demand for construction services remains elevated and purchasers are willing to pay enough to offset rising compensation costs.

“Though there will always be reasons for concern, including those related to geopolitics, the achievement of a first phase trade deal with China and the new United States-Mexico-Canada trade agreement, which replaced NAFTA, should provide much-needed certainty regarding near-term economic prospects,” says Basu.