07-01-19 | Economic News
Nonresidential Construction Sector Has Positive Outlook
Though External Pressures Still Exist

Nonresidential Construction Sector Has Positive Outlook

A recent survey of nonresidential contracting firms showed that an increased number of them expect to expand payrolls in the coming months.

The latest Construction Confidence Index released by Associated Builders and Contractors reported strong signals in spite of the headwinds created by skilled worker shortages and unstable materials prices.

The index, which measures the optimism of nonresidential builders, posted solid scores in each of its three main components. Sales expectations, though down more than a point from the previous month, came in at 68.4. Profit margin expectations increased more than a point to hit 63.0. And the staffing levels component slipped slightly to 67.4 (any score above 50 indicates ongoing expansion in construction activity).

According to the survey, more than 70% of contractors expect sales to increase over the next six months. ABC feels this shows a continued elevated demand for construction services. And 56% of them expect rising profit margins, which the association says suggests that customers remain willing to pay more to get projects done.

"Many economists are convinced that the next recession will begin next year," says ABC chief economist Anirban Basu. "While that is a possibility, there are presently no signs of recession in the nonresidential portion of the economy, as????backlog????remains elevated and demand for construction services continue to rise, especially in public construction segments such as water supply, flood control and highway/street.

"Remarkably, despite growing shortages of skilled workers and rising compensation costs, the average nonresidential contractor has been able to keep profit margins stable, with a significant proportion able to increase margins slightly," Basu adds. "With bidding opportunities remaining robust and firms still in a position to chase opportunities to bolster revenues and profitability, it comes as little surprise that many contractors continue to hire."

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