Sales expectations, profit margin expectations, and staffing level intentions of nonresidential construction industry professionals declined slightly in the second half of 2015, according to the Associated Builders and Contractors’ (ABC) semiannual Construction Confidence Index released Thursday morning. Despite the dip of all three components in the index, the economic outlook for the industry remains positive, as any reading above 50 indicates growth.
Sales expectations declined -3.46% in the second half of 2015, with a reading of 67.0 compared to 69.4 six months prior. Profit margins edged lower to 62.8 from 62.9, while staffing level intentions took a larger dip to 63.9 from 66.2 during the same period of time.
“An abundance of considerations have rendered the typical nonresidential construction executive somewhat less confident regarding near-term business prospects,” ABC chief economist Anirban Basu said in a statement. “These include jittery financial markets, stubbornly low commodity prices, unpredictable Federal Reserve policy and rising consumer delinquencies and corporate defaults.”
Financial concerns aside, confidence in the nonresidential construction industry has also been adversely affected by issues related to the shortage of skilled laborers, expanding geopolitical risks, and the presidential election cycle. Nevertheless, Basu reports that construction executives surveyed still expect the industry to continue its growth streak.
“A number of key nonresidential construction segments continue to blossom, including hotels, data centers, outpatient centers, industrial facilities, education and power,” Basu continued, citing strong growth in labor markets and consumer spending. “While a handful of states are now in recession (including North Dakota, Alaska, West Virginia and Wyoming), most of the nation continues to experience ongoing recovery."
“Still, construction executives are well aware that the business cycle can end abruptly,” warned Basu. “Asset prices continue to be unsettled and credit availability could tighten going forward if markets remain wobbly. The direction of interest rates is naturally of enormous concern to construction leaders since real estate and construction are among the sectors most sensitive to shifts in the cost of capital and the availability of financing.”
Associated Builders and Contractors’ (ABC) Construction Confidence Index (CCI) is a diffusion index that reflects construction contractors’ perceptions of the business environment over a six-month period, as well as the prospects for commercial and industrial construction spending growth in six months ahead. Data of the release are collected from ABC members from across the country through a confidential monthly survey.