Mixed Feelings on the Outlook of the Construction Industry?

There has been much speculation recently about whether or not the economy is heading for another recession, and if so, when it will occur.  Since the last recession, the Construction Financial Management Association (CFMA) has conducted quarterly surveys of construction executives to quantify a “confidence index” in the industry, known as CONFINDEX.  The CONFINDEX assesses responses from construction executives on several topics including current conditions and future outlook.  According to the CFMA, during the first quarter of 2019, the CONFINDEX reached its lowest level since 2010, primarily due to concerns expressed about labor shortages and workforce issues, rising material costs, and uncertainty surrounding public construction budgets.  

However, since the first quarter of 2019, construction executives have displayed increased optimism due to positive current conditions.  The CONFINDEX for the third quarter of 2019 climbed to its highest level in the last four quarters.  Some of the positive developments noted in the third quarter 2019 report include a larger portion of respondents experiencing profit margin increases, sufficient availability of financing, and Federal Reserve rate reductions, which have lowered the cost of capital.  This is all good news for the industry, at least in the near term.

As for the long term, there is still some concern of a recession starting in 2020 and the fear that workforce issues could drive up the cost of construction, and ultimately lead to postponement of construction projects.   A number of other global economic and political uncertainties are causing consternation in the industry.  Only time will tell whether or not these long-terms fears become reality, but for now, most indications are that the industry is performing well.

If you want to know if your company is well-positioned for the uncertainties that lie ahead, the Schneider Downs Construction Industry Group can help.