High materials prices and skilled worker shortages are key factors coloring contractors’ expectations for the future, says the Associated Builders and Contractors in its latest confidence index.
Based on surveys of nonresidential contractors and calibrated on a 0-100 scale, the group's June index shows declining confidence related to sales and staffing compared to both month earlier and one year earlier, although contractors overall still expect both to increase over the next six months, according to ABC.
As ENR previously reported, the construction industry unemployment rate dropped slightly from 3.8% in May to 3.7% in June, says the U.S. Dept. of Labor’s Bureau of Labor Statistics.
The confidence index also shows an expectation for profit margins to drop over the next six months—the first time contractors have expected a cut in profits since last October, says ABC
Anirban Basu, ABC chief economist, said in a statement that contractors may have been too upbeat several months ago, in part because of a large backlog and ability to pass along cost increases to project owners.
“While circumstances are hardly catastrophic, the nonresidential construction marketplace is not as strong as it was expected to be,” he said.
ABC’s Construction Backlog Indicator also dropped slightly in June, by 0.1 months, to 8.9 months, but it was still up by 0.4 months from June 2021. The backlog for commercial and institutional projects was greatest in June at 9.4 months, while the heavy industrial and infrastructure backlogs were both down. Regionally, the South had the greatest backlog at 10 months.
“In the context of rising fears of recession and rising borrowing costs, the stage has been set for softer nonresidential construction activity going forward,” said Basu, who expects contractors on public projects to remain busy in part due to Infrastructure Investment and Jobs Act funding
“Still, the market may not prove as robust as anticipated given delayed project start dates as public agencies determine the right moment to purchase construction services,” he added.