New York Construction Report staff writer
A survey by the Associated Builders and Contractors (ABC) shows the Construction Confidence Index readings for sales, profit margins and staffing levels declined in July, however, sales and staffing remain above the threshold of 50, indicating expectations of growth over the next six months.
“The level of construction activity has begun to fade,” said ABC Chief Economist Anirban Basu. “While the average contractor still expects employment and sales to climb over the next six months, the current pace of expansion is poised to be slower than earlier stages of economic recovery.
Higher borrowing costs, weak commercial real estate fundamentals and the reluctance of many project owners to bear the full brunt of higher construction materials prices and rising compensation costs are pushing profit margins lower and driving pessimism higher. The average contractor expects margins to shrink over the next six months.
“A growing number of contractors are preparing for tougher times ahead,” said Basu. “That is nothing new for an industry that has proven itself to be highly resilient and cyclical in recent decades.
“Nonetheless, for now, many contractors continue to operate at capacity and are actively looking to hire additional workers to expand capacity. It is simply too soon to conclude that the nonresidential construction industry has entered recession despite recent declines in backlog.”