Nonresidential construction confidence index soars

Source: Associated Builders and Contractors, Washington

The ABC Construction Confidence Index (CCI), which reflects nonresidential construction industry prospects using three measured categories—revenues, profit margins and hiring—increased across all indices during the first six months of 2014.

As a diffusion index, readings above 50 indicate growth, while readings below 50 are unfavorable. Each index now stands at a post-recession high implying that nonresidential construction’s recovery, already robust, is positioned to continue into the year ahead. During the first half of 2014: sales expectations rose from 63.2 to 68.2; profit margin expectations expanded from 57.5 to 60.3; and, staffing level intentions increased from 62.2 to 65, indicating an acceleration in hiring going forward.

“A number of factors are aligning to boost the performance of the nonresidential construction industry and the confidence of construction business owners,” says ABC Chief Economist Anirban Basu. “August notwithstanding, employment growth has been solid, including in segments such as professional/business services and leisure/hospitality, which in turn is helping to trigger new construction in office and lodging segments. The industry’s confidence has also been boosted by low interest rates, easing credit conditions for developers, expanded consumer spending and stabilizing state and local government revenues, which in many cases is attributable to a combination of higher retail sales and property tax revenue.

“While industry momentum has improved with the weather and the current survey indicates the pace of progress will continue to accelerate into 2015, do not expect a boom. The bulk of respondents believe that improvement in sales, profit margins and staffing levels will be gradual. Moreover, while nearly three-quarters of respondents expect sales volume to increase during the months ahead, fewer than half expect an improvement in profit margins, indicating that the marketplace remains unusually competitive from a pricing perspective.”