Economy Watch: Construction Companies Fairly Confident About the Future

Optimism among U.S. construction contractors dipped in the second half of 2016, but the majority of them still expect to see growth this year, according to the Associated Builders and Contractors' latest Construction Confidence Index.
Source: Associated Builders and Contractors’ (ABC) Construction Confidence Index (CCI)
Source: Associated Builders and Contractors’ (ABC) Construction Confidence Index (CCI)

While U.S. construction firms’ expectations for 2017 have become less optimistic, the majority of industrial and commercial construction contractors still expect growth this year, according to the latest Associated Builders and Contractors’ Construction Confidence Index (CCI), which was released on Thursday.

Although all three indices in the survey—profit margins, sales and staffing levels—fell by more than five points, they remain well above the threshold of 50. That signals that construction activity will continue to expand, at least over the next six months. The CCI for sales expectations fell from 65.11 to 59.7, from 61.1 to 56 for profit margin expectations, and from 64.9 to 59.5 for staffing levels expectations.

According to the organization’s chief economist, Anirban Basu, a number of construction segments have experienced significant expansion recently, including office, hotel, health care and multifamily segments. “This helps explain why more than 60 percent of respondents expect their sales to rise during early 2017, and the same number expect staffing levels to rise,” he noted.

There’s also some optimism among the respondents that public spending on construction will pick up because of an infrastructure package. But not in the short term. If implemented, many of the initiatives wouldn’t impact the industry until well beyond the six-month timeframe built into the construction confidence survey.