Report: Construction execs positive on short-term growth despite rising material prices, labor shortage
- Engineering News-Record's second-quarter Construction Industry Confidence survey has revealed that construction executives are positive about the industry's short-term prospects despite the persistent labor shortage and increasing material prices but are more cautious when it comes to the long-term. The index's second-quarter reading fell three points to 70, but a mark of 50 or higher still indicates market growth.
- Of the 301 construction and design executives who participated in the survey, the majority responded that the industry will continue its growth pattern into 2019. Almost 30% of respondents predicted the industry will still be expanding in 12 to 18 months, but 15% said the market will be in a decline by then. However, only 16% said the construction industry would be in a growth mode in three years, with 35% forecasting a contraction. Materials price pressure is something that 86.4% of respondents said they are experiencing, a more than 12% increase from the first quarter, with steel prices now a major concern for most in the wake of U.S. tariffs. Not even 7% of survey participants said the shortage of labor had eased since last year, but more than 47% responded that the shortage was somewhat worse. More than 14% said the shortage was much worse.
- The results of the latest, yet unreleased, Confindex survey of chief financial officers conducted by the Construction Financial Management Association seem to indicate an even greater optimism. The Confindex reading increased by three points quarter over quarter, and all four of the survey's market and financial components — general business conditions, financial conditions, current conditions and year-ahead outlook — trended upward as well. While CFOs appear confident in the face of more expensive construction materials and the labor shortage, rising interest rates and the prospect of higher project financing costs are a concern to many.
Not even a month ago, the Equipment Leasing and Finance Foundation's Vertical Market Outlook Series – Construction report also said that both residential and commercial construction markets should continue to grow by at least 5% through the end of this year. The foundation also predicted that resiliency, the labor shortage, how automation and technology impact productivity and safety, building information modeling, artificial intelligence, big data and impactful policy regulations will be trending industry concerns throughout 2018.
Steel prices had already been on the upswing before President Donald Trump imposed a 25% tariff on the material back in March, and the retaliation from this action has been steady and swift from U.S. trade partners like Canada, which has imposed its own countermeasures in an attempt to mitigate the economic impact of the administration's tariffs. Mexico has also enacted new tariffs, mostly on U.S. agricultural products, and the European Union has imposed similar duties on U.S. goods.
- Engineering News-Record Despite Headwinds, Execs See Market Up Through 2019
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