Contractor Confidence is Up in the Second Quarter of 2019

Contractors, including general and specialty trade contractors, are optimistic about new business opportunities going into the second half of 2019, according to the Q2 2019 Commercial Construction Index (CCI) from USG Corp. and the U.S. Chamber of Commerce. The CCI rose two points from the first quarter of 2019 to 74 due to an increase in two of the three key drivers of the index.

The ratio between the average current backlog (10.3 months) and the stated ideal level of backlog (12.5 months) is 82, the highest it’s been since the CCI initially launched in the first quarter of 2017 and up five points from Q1 2019. This means that contractors are closer to achieving their ideal work backlog than they have at any point in the past two years.

Contractors’ level of optimism about new business opportunities in the next 12 months is up three points to 74 after a small drop in Q1 2019, revealing their expectations for a steady market over the next year. Nearly three-quarters of large contractors are highly confident in the next year’s outlook compared to 42% of small companies. The two-year outlook also improved, with 27% of contractors reporting high confidence, up from 21% last quarter.

Revenue growth fell back one point to a new low of 66. According to the CCI, this number has continued to shrink, with a six-point drop year-over-year from Q2 2018. This quarter, 60% of contractors expect revenue to remain the same while only 36% expect an increase.

Green Projects

CCI’s Q2 2019 quarterly spotlight focuses on green projects. According to the index, contractors’ share of green projects declined from 30% in Q2 2017 to 20% in Q2 2018 and, finally, to 18% this quarter.

“This is particularly surprising since other industry studies do not reveal a similar slowdown in green work. This quarter’s study shows that green projects are done more frequently by large contractors,” reads the index report. “The findings may suggest the majority of green projects are becoming concentrated among a smaller group of companies.”

However, CCI findings show that contractors are still considering how to influence sustainability. Contractors’ reported using green practices on a relatively high percentage of projects and more than 80% reported working on at least some share of green projects, though this is down from 2017.

The sustainability trend varied by firm size and region. Fifty-three percent of large companies see sustainability as a competitive advantage compared to 24% of small firms. More contractors in the West (44%) regularly propose green solutions compared to the Midwest (19%).

Among general contractors, 80% say that energy efficiency has a positive influence on their purchasing decisions. Despite this high number, general contractors rank cost as the top reason to not choose a green product.

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