Construction Confidence Remains High Despite Future Uncertainty

By and large, those in the construction and electrical industries continue to have confidence that growth will continue, particularly in the short term. However, there are concerns that factors such as the labor shortage, material prices, tariffs and more could have a negative impact on long-term growth.

The Engineering News-Record’s (ENR) Construction Industry Confidence Index (CICI) survey recently released its second-quarter results, and these mixed emotions are apparent. Overall, the CICI fell to 70 in Q2, three points down from the first quarter’s number of 73. ENR describes these results as a mix of near-term optimism and longer-term caution, with most executives surveyed predicting market growth through mid-2019. However, in three years, 35 percent are expecting to see a decline.

ENR surveyed 301 executives of large construction and design firms for the CICI. Any number above 50 indicates a growing market.

Meanwhile, the Construction Financial Management Association’s (CFMA) CONFINDEX quarterly reading moved up to 119—that’s a three-point increase over Q1’s 116. This index surveys 300 CFOs in the commercial construction sector. In this case, a finding of “100” is neutral; anything above that indicates overall optimism.

June 2018 Confindex
Courtesy of the CFMA

Even so, the CONFINDEX is down 3.3 percent from one year ago. Much like the CICI, the findings suggest some factors may be keeping CFOs’ confidence from going through the roof.

“It would be simple to attribute at least some of this wobbliness to the first quarter’s winter weather and the fret and turmoil associated with potential trade wars, tariffs, and rising materials prices that characterized the second quarter,” the CFMA stated.

Current feelings also are generally positive on the electrical manufacturing side of things, with the latest Electroindustry Business Conditions Index (EBCI) from the National Electrical Manufacturers Association recording a nine-point jump to 69.2. This is the highest reading since January for an index that examines the business environment for electrical equipment manufacturers.

Courtesy of NEMA
Courtesy of NEMA

Once again, though, there is a high degree of uncertainty among respondents about the future.

“The solid topline number was tempered by respondent comments that pointed to an undercurrent of uncertainty along with sector-specific struggles brought about by trade actions and the tax bill,” according to NEMA. “The proportion of panel members that reported expecting worse conditions doubled, while the share of those expecting better conditions in six months edged lower.”

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