Commercial Construction Index Reveals Surge in New Business Confidence

Thaddeus Swanek
Senior Writer and Editor, Strategic Communications, U.S. Chamber of Commerce

Published

June 20, 2019

Over half of commercial construction contractors are highly confident about the ability of the market to provide sufficient new business opportunities in the next 12 months, according to the Q2 2019 USG Corporation + U.S. Chamber of Commerce Commercial Construction Index (CCI).

Overall, the Q2 Index composite score of 74 is up two points from 72, and its findings reveal positive trends in the industry including:

52% of contractors say they are highly confident about the ability of the market to provide new business opportunities in the next 12 months, an 11% increase over last quarter.
The backlog ratio, comparing contractors’ average current backlog of projects to the ideal amount of work they would like to take on, reached 82, the highest since the CCI launched in 2017.
Hiring expectations recovered in Q2, with most contractors (60%) anticipating employing more people in the next six months.
60% of contractors reported confidence that revenue will remain stable.

Finding enough skilled labor remains a perennial concern of contractors, but this quarter’s results show the concern tapering somewhat. The number of contractors who report “high concern” over the availability of skilled labor declined to 46% this quarter (down from 54% last quarter), a notable shift from the previous three quarters. And even though contractors show increased confidence in having access to skilled labor, 85% of contractors still report “high concern” about the cost of that skilled labor.

This quarter, the Index also explored sustainability practices in construction. The findings show the average share of green projects for contractors declining. This finding is interesting, since other industry studies reveal no slowdown in the number of green construction projects. One explanation may be that the majority of green work is becoming concentrated among a smaller group of specialized companies: The study shows that green projects are done more frequently by large contractors.

The Index also reports some other interesting sustainability findings:

Most contractors (84%) say they must meet green standards (like LEED) on at least some projects.
Fewer than half (47%) take advantage of green incentives like tax breaks.
The most important green attributes swaying contractors’ purchasing decisions are: energy efficiency (80%), materials without harmful chemicals (65%), and water efficiency (64%).

Overall, the Q2 Index composite score of 74 – up two points from 72 in Q1 – shows a vibrant commercial construction sector, although contractors’ revenue expectations slightly decreased.

The Q2 2019 results from the three key drivers were:

Backlog: Contractors’ ratio of actual to ideal backlog rose five points (to 82 from 77), hitting its highest point since the Index launched in 2017.
New Business Confidence: The level of overall confidence rose three points (to 74 from 71), suggesting a return of optimism about the market’s ability to provide new business opportunities in the next 12 months.
Revenue: The revenue score dropped one point (to 66 from 67), although most contractors (60%) expect revenue to remain the same.

Neil Bradley, U.S. Chamber of Commerce executive vice president and Chief Policy Officer, said that with the right policy solutions, things could look even brighter for the industry.

“The second quarter findings suggest that the construction industry remains strong, optimistic and future-focused. To keep this good momentum going, we need durable, bipartisan policy solutions from Washington that promote trade, reform our immigration system, and better prepare America’s workforce for the jobs of the future,” Bradley said.