Source: U.S. Chamber of Commerce, Washington, D.C.
Data from the first quarter U.S. Chamber of Commerce Commercial Construction Index reveals contractors are growing more optimistic, mostly driven by a rise in revenue expectations. They also have better outlooks on hiring and equipment spending plans as business concerns related to the coronavirus pandemic lessen.
For Q1 2021, 36 percent of contractors expect their revenue to increase over the next year, a jump of 11 percentage points from 25 percent in Q4 2020. Eighty-seven percent expect their revenue to either stay the same or increase, up slightly from last quarter. Most contractors also report a moderate to high level of confidence that the U.S. market will provide enough new business in the next year. Nearly a quarter (24 percent) report a high level of confidence, up from 19 percent in Q4 2020. Hiring plans are also positive as close to half (46 percent) of contractors say they will employ more people in the next six months, up from 37 percent in Q4 2020. The same percentage expect to keep the same number of workers, and just 3 percent expect to reduce their staffing, down from 12 percent in Q4 2020.
“As vaccines continue to roll out, contractors are expecting to hire more workers and anticipating good times ahead. The industry still has a way to go to return to pre-pandemic levels, but rising optimism in the commercial construction industry is a positive sign for the broader economy,” says Chamber Executive Vice President and Chief Policy Officer Neil Bradley. “Finding skilled workers was a critical issue before the pandemic, and while it has remained a chronic problem over the last year, heightened concern may be emerging again as contractors look to hire. The U.S. Chamber is committed to supporting businesses in retraining and making sure the economy has the skilled workforce it needs.”
Contractors’ boost in revenue expectations drove a three-point rise in the first quarter’s overall Index score to 62. The score for revenue expectations, one of three leading Index indicators, jumped five points to 57, while contractors’ confidence in new business opportunities rose two points to 59. Despite the gains, the Index remains 12 points below its score of 74 from Q1 2020.
Alongside the positive signs of recovery come workforce challenges: 85 percent of contractors report moderate to high levels of difficulty finding skilled workers in Q1 2021, up from 83 percent in the prior quarter. Of those, 45 percent report a high level of difficulty, up from 42 percent last quarter, but still down 10 percentage points year-over-year from 55 percent in Q1 2020.
In addition to workforce limitations, nearly three-quarters of contractors report facing shortage of at least one material. Of those, 22 percent are experiencing a shortage of wood or lumber (down from 31 percent in Q4 2020), followed by steel (14 percent), and pipe/PVC (10 percent).
This quarter, more (82 percent) contractors say cost fluctuations have a moderate to high impact on their business, up eight percentage points from Q4 2020, and up 17 percentage points year-over-year. Of those experiencing the impact of cost fluctuations, 43 percent said wood or lumber is the product of most concern (down from 61 percent in Q4 2020), followed by steel (35 percent), and copper (27 percent).
The Index factors three leading indicators—revenue, new business confidence and backlog—to gauge commercial construction industry confidence, generating a composite Index on the scale of 0 to 100 that serves as an indicator of health of the contractor segment on a quarterly basis.