According to the Q2 2020 USG Corporation and U.S. Chamber of Commerce Commercial Construction Index report, the index plunged from 74 (out of a possible 100) in Q1 to 56 in Q2.
In addition, two of the three main indicators fell significantly: new business confidence (contractors’ overall level of confidence) dropped from 76 to 50, and revenue (contractors’ revenue expectations over the next 12 months) dropped from 70 to 44. The third indicator (backlog) only dropped from 76 to 73.
The overall drops in the index stemmed in part from the fact that very few contractors (16%) now express high confidence in the market’s ability to provide new business opportunities in the next 12 months, which was down from 54% in Q1. There was a 30 percentage point drop in contractors expecting their revenues to increase (17% in Q2, which was down from 47% in Q1). Meanwhile, the percentage expecting to see their revenues decrease in the next 12 months shot from 2% in Q1 to 21% in Q2.
The gloomy outlook is largely the result of the pandemic.
“When the survey was taken in April 2020, the vast majority (87%) of contractors reported they were currently experiencing delays due to the coronavirus outbreak, with 87% expecting delays to continue into the summer, and 73% expecting delays will remain in the fall,” according to the Chamber’s press release on the index.
“Even as most construction has been deemed essential during the last few months, the loss of new projects and revenue has been severe,” said Christopher Griffin, president and CEO of USG Corporation.
“This industry is key to our economy, representing three million American jobs and $700 billion in spending. We’re watching closely signs of improvement, as commercial construction can serve as a bellwether for other economic development and recovery.”
There is some good news, however, according to the report. In fact, several survey findings suggest that the industry is poised to recover. For example:
- 60% of contractors report at least six months of backlog,
- 83% expect their revenues to stay the same or increase in the next year,
- 3/4 of contractors say they have moderate or high confidence that the next year will bring sufficient new business opportunities. That percentage rises to 93% in the next two years.
“(T)he commercial construction industry appears poised for a quick recovery and a return to growth,” said Neil Bradley, executive vice president and policy officer of the U.S. Chamber of Commerce. “This is good news for the economy and the millions of Americans who work in the industry.”