Dive Brief:
- Non-residential contractor confidence rose in August, Builders shrugged off fears of a looming recession and thus held steady despite evidence that the Fed will need to further escalate its war on inflation with higher interest rates, according to Associated Builders and Contractors.
- ABC’s construction backlog measure, which measures the month in which construction contractors have won bids but has not yet started construction, was 8.7 months in August, unchanged from July and a full month higher than August 2021. Sustained levels came from growth in the commercial and institutional sectors, as well as heavy industrial projects, even as bookings for infrastructure projects declined.
- results helped buoy contractor optimism about sales, staffing and most notably profit margins over the next six months, all of which were up from July’s figures but still below levels a year ago. Profit forecasts for this year have been affected by persistent inflation and rising personnel costs.
Dive Insights:
“The boom in the national non-residential construction market has really been remarkable,” said ABC chief executive Anirban Basu The Economist, in a press release. “Rising interest rates have pushed the single-family homebuilding market into recession, but brisk non-residential activity continues.”
Provided by relevant builders and contractors
With many non-residential contractors operating at full capacity, expectations are rising, Basu said. The industry’s main challenges are related to supply-side issues, such as worker shortages, delayed equipment deliveries and rising material prices, rather than demand for its services, a typical sign of a weak environment for the sector.
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But that doesn’t mean non-residential building contractors can relax. Last week saw a slight dip in planning activity and slower growth in the Construction Billings Index, another harbinger of future construction demand. But both remain in positive territory this year.
ABC Construction Backlog Indicator and Construction Confidence Index, 2012-August. 2022
by relevant builders and contractors
This is the last broad economic indicator that members of the Fed’s Open Market Committee will see ahead of a meeting later this month to consider further rate hikes. Economists expect the CPI to contract slightly this month.
