ABC: Contractor confidence tumbles at end of 2016, remains in positive territory
- The Associated Builders and Contractors reported that construction confidence fell again in the second half of 2016 from its first-half levels, but the organization added that the latest readings from its Construction Confidence Index (CCI) still indicated growth for the first six months of 2017.
- Sales expectations fell from an upward-adjusted 65.1 to 59.7 on the CCI, and profit margin predictions slipped from 61.1 to 56. The CCI reading for intended staffing levels also fell from 64.9 to 59.5.
- The ABC has not reported increased confidence since 2015's first-half reading; however, as long as each of the three categories remains above 50, they still are considered generators of construction activity.
ABC Chief Economist Anirban Basu said in a release that the slight downward turn in profit expectations had its roots in the ongoing skilled labor shortage. Contractors in high-activity states like Florida are increasing wages to draw and retain workers, which is taking a bite out of the bottom line on many projects.
This factor, Basu said, was one of the reasons that only 48% of surveyed contractors said they expected to see their margins increase in the first half of 2017. This result was a decrease from the last survey when 54% reported higher wages were cutting into profits, meaning that the industry has seen an even stronger tightening of the labor market.
Participants also believed that while increased infrastructure would boost the industry, any benefit from Trump's $1 trillion plan or slashing of regulations would not be realized until after the survey's six-month forward look. Whether this week's news that President Donald Trump might try to fast-track an infrastructure bill would have affected participant responses is unknown.
There are some positive aspects to this latest CCI report. Despite the lack of public works activity, Basu said that growth in the office, hotel, healthcare and multifamily sectors caused 60% of contractors to report that they expected sales and staffing levels to increase.
The ABC's fourth-quarter 2016 Construction Backlog Indicator report also dipped, with heavy industrial driving the decline. As in the ABC's latest CCI narrative, the lack of publicly funded construction projects was behind the overall downturn.
- Associated Builders and Contractors Contractor Confidence Ends 2016 Down but Still in Positive Territory
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