Contractor optimism sees modest improvement

Optimism from contractors improved slightly in December, according to Associated Builders and Contractors.

Associated Builders and Contractors reported that its Construction Backlog Indicator rebounded modestly to 7.3 months in December, an increase of 0.1 months from November’s reading, according to an ABC member survey conducted from Dec. 18 to Jan. 5. 

Although the backlog is 1.5 months lower than December 2019, ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels increased in December. 

The sales index climbed above the threshold of 50, indicating contractors expect to grow sales over the next six months. The index reading for profit margins remained below that threshold. The staffing level index increased to 56.3 but remains below its December 2019 reading.

“While many contractors enter 2021 with significant trepidation, the most recent backlog and confidence readings suggest that the onset of vaccinations has generally led to more upbeat assessments regarding nonresidential construction’s future,” said ABC Chief Economist Anirban Basu. “Backlog is down substantially from its year-ago level and profit margins remain under pressure, yet many contractors expect to enjoy higher sales and to support more staff six months from now.”

Basu noted that the “baseline expectation” for the spring is a surge in the U.S. economy.

“With many households sitting on mounds of savings and sustaining pent-up demand for many goods and services, the U.S. economy is set for rapid growth as it reopens more fully during mid to late 2021,” the economist said. “While it will take time for that to fully translate into new construction projects, some that were postponed earlier during the pandemic are likely to come back to life over the next several months. That should help many contractors begin to rebuild backlog, and to eagerly await 2022.”

Based in Washington, D.C., Associated Builders and Contractors is a national construction industry trade association representing more than 21,000 members. 

The full report from Associated Builders and Contractors is available here.