The Q3 2019 USG Corporation + U.S. Chamber of Commerce Commercial Construction Index released today climbed to a record high score of 77, up from 74 in Q2 2019. The finding shows that contractors are optimistic about revenues, profits and continued robust workloads despite persistent challenges in finding skilled labor.
One of the striking findings from this quarter are the upticks in expectations for higher profits and revenues:
- Half of all contractors expect revenue increases over the next year, rising 14 points quarter-over-quarter.
- 39% of contractors in Q3 expect profit margins to increase in the next year, up from 27% in Q2.
This optimism also extends to the anticipated workload of projects, with the majority (58%) of contractors reporting they are highly confident that the next 12 months will bring sufficient business opportunities, a six-point growth over Q2. And 61% of contractors report that they expect to increase their workforce in the next six months.
However, 61% of respondents also report difficulty in finding skilled workers (up 4% compared to last year and up 7% quarter-over-quarter). These skill shortages are having an impact in the real world with:
- 81% of contractors asking their current skilled workforce to do more work.
- 49% currently turning down opportunities for work.
“Half of contractors report turning down jobs because of a lack of workers,” said Neil Bradley, U.S. Chamber of Commerce executive vice president and chief policy officer. “We have the opportunity to expand the number of people with good paying jobs and keep our economy growing, but only if Washington steps up to fix our broken immigration system and reform employment training programs.”
The Index uses three leading indicators to gauge confidence in the commercial construction industry. The Q3 2019 results for the three key drivers in the report were:
- Backlog: The backlog indicator remained at a high of 82 (the same as in Q2).
- New Business Confidence: The overall level of contractor confidence moved upward to 76 (up two points from Q2).
- Revenue: Contractors’ revenue expectations over the next 12 months jumped to 72 in Q3 (up six points from Q2).
Contractors See Owners as Crucial to Resilient Building
With the recent Category 5 Hurricane Dorian hitting the Bahamas with 185 mile-per-hour winds and the ongoing hurricane season in the Atlantic, extreme weather is top of mind. And this year the Index reflected that, asking contractors about resiliency: how extreme weather affects them, their projects and their project schedules.
One of the key findings from this section of the report is that general contractors strongly feel resiliency needs to be emphasized early by project owners:
- More than 70% of general contractors rank owners as the most influential in making projects resilient.
- Architects came a distant second, with 13% saying they were most influential.
- None of the respondents ranked contractors first in terms of influencing how resilient a project is.
Not surprisingly, three-quarters of general contractors said they have experienced schedule delays due to extreme weather events. Overall, less than two-thirds of general contractors (61%) report that they include the impact of weather when calculating project bids.
There was also a wide regional variation in how contractors factor in weather when calculating project bids:
- In the South, only 38% of respondents said they include the impact of weather when calculating project bids.
- In the Midwest, 64% of contractors include the impact of weather in their bids.
About two-thirds of contractors agree that building codes on resiliency are necessary to improve the ability of buildings to withstand the impact of severe weather and natural disasters, but find the current codes only moderately effective in doing so.