CCI: Contractor Confidence Moves Upward in First Quarter of 2020

After hitting a record high in the third quarter of 2019 and a record low in the fourth quarter, contractor confidence has leveled out in the first quarter of 2020. The Commercial Construction Index (CCI), released by USG Corp. and the U.S. Chamber of Commerce, moved up three points to a score of 74, which indicates a healthy market.

The majority of data is from a survey of contractors conducted online from January 9-25, 2020. It represents contractor confidence prior to the COVID-19 pandemic and its effects.

Drivers of Confidence

The three key drivers of confidence either increased or remained the same from their fourth quarter levels:

  • The ratio of average current and ideal backlogs was unchanged from last quarter’s level of 76;
  • Revenue grew by four points to a score of 70, after being below 70 for five of the last six quarters; and
  • Contractors’ confidence in the market’s ability to provide new business in the next 12 months increased by four points to 76.

Backlog

In Q1 2020, 39% of contractors reported an increase in their backlog while 40% said it was unchanged and 20% reported that it had decreased. The average length of backlog is 9.7 months, slightly higher than Q4 2019’s average of 9.5 months. The ideal backlog is 12.8 months.

New Business

The percentage of contractors that report a high degree of confidence in sufficient new business opportunities in Q1 2020 was 54%, seven percentage points higher than in Q4 2019. Forty-five percent of contractors reported a moderate degree of confidence and only 1% reported a low degree of confidence.

However, contractors’ 24-month outlook is more conservative, with 30% of contractors reporting a high degree of confidence, 64% a moderate degree and 6% a low degree. These findings are consistent with the last two quarters’.

The CCI showed that more general contractors (35%) reported having a high degree of confidence in the market over the next 24 months compared to trade contractors (25%).

Revenue

The percentage of contractors that expect an increase in revenue in the next 12 months (47%) is nearly even with the percentage expecting revenue to remain the same (50%). This is a major change from Q4 2019, when only 36% of contractors expected a revenue increase. However, what’s similar to last quarter is that more than half of those expecting an increase estimate it to be 4% or more.

Expected changes in profit margins in the next 12 months are nearly identical to last quarter’s report, with 31% of contractors expecting an increase and 65% expecting profit margins to remain about the same. The level of profit margin varies by region. In the West, 22% of contractors expect higher profit margins in the next 12 months compared to just 3% in the Northeast.

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1 Response to CCI: Contractor Confidence Moves Upward in First Quarter of 2020

  1. Well that is certainly some good news! Our world may have changed, but the tested processes, extra effort and hard-working spirit will prevail in the end. We’ll be better for it.

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