Construction industry leaders’ confidence fell in May amid materials and labor shortages, but contractors generally expect growth during the next six months, according to www.abc.org.
Two of the three components decreased in May, but all three remained above the diffusion index threshold of 50.
In May, the Associated Builders and Contractors’ Construction Confidence Index decreased from 64 to 62.9 for staffing levels and 53.4 to 53.2 for profit margin expectations. The index increased from 63.9 to 64.2 for sales expectations.
Additionally, ABC’s Construction Backlog Indicator rose to eight months in May.
ABC Chief Economist Anirban Basu said the increase in backlog and expected expansion for sales, profit margins and staffing represent “an extraordinary set of findings.”
“First, materials prices have risen significantly over the past year and labor costs are also on the rise,” Basu said. “All things equal, one might think this would suppress profit margin growth. Apparently, demand for construction services is strong enough to generate sufficient pricing power to more than fully countervail those factors. Second, skills shortages continue to impact the construction industry and many other segments. Despite that, the average nonresidential contractor expects to expand their teams during the months ahead.
“Third, conventional wisdom suggests that commercial real estate fundamentals are weak in the context of remote working, online shopping and sluggish business travel,” Basu continued. “Nonetheless, backlog in the commercial category remains stable. Fourth and finally, while there has been much talk about a federal infrastructure plan, it remains elusive. Nonetheless, backlog in the infrastructure category rose significantly in May, perhaps a reflection of stronger state and local government balance sheets and associated increases in infrastructure outlays. In sum, contractors can expect healthy growth in activity through the balance of 2021.”
