Slight Dip in Construction Confidence Index Doesn’t Dampen Recovery Optimism
The latest Associated Builders and Contractors’ Construction Confidence Index is down marginally, but the overall outlook remains steady. Plus, top construction companies in U.S. are ranked.
Construction executives collectively expect nonresidential construction's impressive post-recession recovery to continue in 2016.
The latest Associated Builders and Contractors (ABC) Construction Confidence Index (CCI) showed a slight dip in the second half of 2015, although all three components of the index reflected optimism for continued economic growth. The diffusion index measures forward-looking construction industry expectations in sales, profit margins and staffing levels, with readings above 50 indicating growth.
ABC released the following CCI numbers on April 14:
- Sales expectations fell from 69.4 to 67.0 compared to the previous survey
- Profit margin expectations edged lower from 62.9 to 62.8
- Staffing level intentions dipped from 66.2 to 63.9
Despite a handful of states that are now in recession – including North Dakota, Alaska, West Virginia and Wyoming – most of the nation continues to experience ongoing recovery, led by consumer spending. Several key nonresidential construction segments continue to thrive, including hotels, data centers, outpatient centers, industrial facilities, education and power, according to ABC.
Construction executives collectively expect nonresidential construction’s impressive post-recession recovery to persist, in large measure because backlog remains high, says ABC Chief Economist Anirban Basu.
“An abundance of considerations have rendered the typical nonresidential construction executive somewhat less confident regarding near-term business prospects. These include jittery financial markets, stubbornly low commodity prices, unpredictable Federal Reserve policy and rising consumer delinquencies and corporate defaults,” Basu says. “Outside of financial concerns, the industry is concerned by skilled construction worker shortages, the unpredictable presidential election cycle and expanding geopolitical risk.”
A recent uptick in labor force participation is fueling expectations for near-term economic expansion and construction continues to generate a disproportionate share of the nation’s net new jobs.
“Still, construction executives are well aware that the business cycle can end abruptly,” Basu says. “Asset prices continue to be unsettled and credit availability could tighten going forward if markets remain wobbly. The direction of interest rates is naturally of enormous concern to construction leaders since real estate and construction are among the sectors most sensitive to shifts in the cost of capital and the availability of financing.”
The increase in overall construction spending is being led by significant growth in the private sector. According to Leopardo’s 2016 Construction Economics Report and Outlook, since 2011 spending on multifamily buildings grew at 29.4% annually, which is more than double of spending in single family properties.
Economists agree that multidwelling units will continue to rise in 2016 but at lower rates compared to a year ago, Insider Monkey recently reported. Low apartment vacancy rates in some parts of the country, coupled with the fact that employment has increased among millennials who chose renting over ownership, will drive multifamily construction. Still, figures released by the U.S. Commerce Department show that the beginning of 2016 brought a significant uptick in single-family units. Single-family housing starts climbed 7.2% to a rate of 822,000 in February, which is the highest level since November 2007.
Following is a Top 10 listing of U.S. construction firms as ranked by Insider Monkey. The online publication’s ranking takes into account 2014 revenue, 3-year growth and awards and recognition that companies received in recent years. It also relied on the Inc. 5000 list, which ranks companies that have recorded the greatest growth in last three years.
1. Shawmut Design and Construction
2014 revenue: $957.6 million
3-year growth: 44%
2. ARCO Construction Company
2014 revenue: $770.5 million
3-year growth: 234%
2. ARCO Construction Company
2014 revenue: $770.5 million
3-year growth: 234%
3. Build Group
2014 revenue: $326.3 million
3-year growth: 308%
4.Power Home Remodeling Group
2014 revenue: $300.9 million
3-year growth: 137%
5. Commodore Builders
2014 revenue: $224 million
3-year growth: 131%
6.Thompson Thrift Construction
2014 revenue: $182.7 million
3-year growth: 113%
7. Response Team 1
2014 revenue $173.5 million
3-year growth 1339%
8. Edge Home
2014 revenue: $137.7 million
3-year growth: 277%
9. The Rinaldi Group
2014 revenue: $137.2 million
3-year growth: 505%
10. Arch-Con Construction
2014 revenue: $113.5 million
3-year growth: 601%
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About the Author
Rodney Bosch, Senior Editor
Although Bosch’s name is quite familiar to those in the security industry, his previous experience has been in daily newspaper journalism. Prior to joining SECURITY SALES & INTEGRATION in 2006, he spent 15 years with the Los Angeles Times, where he performed a wide assortment of editorial responsibilities, including feature and metro department assignments as well as content producing for latimes.com. Bosch is a graduate of California State University, Fresno with a degree in Mass Communication & Journalism. In 2007, he successfully completed the National Burglar and Fire Alarm Association’s National Training School coursework to become a Certified Level I Alarm Technician.
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