Construction Confidence Edged Down in Second Half of 2015

The construction industry was slightly less confident in the second half of 2015 than the first, according to Associated Builders and Contractors’ (ABC) Construction Confidence Index (CCI). However, all three components of the index showed optimism for continued economic growth.

The diffusion index measures forward-looking construction industry expectations in sales, profit margins and staffing levels, with readings above 50 indicating growth.

Sales expectations fell from 69.4 to 67.0 during the most recent survey administration; profit margin expectations edged lower from 62.9 to 62.8; and staffing level intentions dipped from 66.2 to 63.9.

“An abundance of considerations have rendered the typical nonresidential construction executive somewhat less confident regarding near-term business prospects,” says ABC chief economist Anirban Basu. “These include jittery financial markets, stubbornly low commodity prices, unpredictable Federal Reserve policy and rising consumer delinquencies and corporate defaults. Outside of financial concerns, the industry is concerned by skilled construction worker shortages, the unpredictable presidential election cycle and expanding geopolitical risk. Still, construction executives collectively expect nonresidential construction’s impressive recovery to persist, in large measure because backlog remains high.”

He adds, however, that construction executives are well aware that the business cycle can end abruptly.

“Asset prices continue to be unsettled and credit availability could tighten going forward if markets remain wobbly,” he says. “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.”

Additional analysis is available on ABC’s website.