The construction industry is slowly but surely moving in a positive direction as the impacts of COVID-19 start to lessen. Data from the 2021 third-quarter U.S. Chamber of Commerce Commercial Construction Index (CCI) shows two of the three key drivers of the Index—contractor confidence in new business and backlog—improved this quarter. One key driver (revenue) remained unchanged. The CCI has regained 10 points from its low of 56 at the start of the pandemic, though it is still eight points below the pre-pandemic level of 74 in the first quarter of 2020.
The three indicators, revenue, contractor confidence in new business and backlog, are used to gauge confidence in the commercial construction industry, generating a composite index on the scale of 0 to 100 that serves as an indicator of health of the contractor segment on a quarterly basis. The research in the report was developed with Dodge Data & Analytics by surveying commercial and institutional contractors.
Revenue expectations held steady at 61, the same as last quarter. This score is still below its score of 70 in pre-pandemic Q1 2020. Most contractors (53%) expect their revenues to remain about the same in the next 12 months. According to the data, 37% of contractors expect their revenue to increase in the next year (down two percentage points from last quarter), while 10% of contractors expect a decrease in revenue over the next year, up four points from last quarter.
New Business Confidence
The overall level of contractor confidence increased to 64. This is up 14 points from Q2 2020 (after COVID-19 shutdowns), indicating a steady recovery, but still below its score of 76 in pre-pandemic Q1 2020. Most (90%) contractors report a moderate to high level of confidence that the U.S. market will provide sufficient new business opportunities in the next 12 months (up one point from Q2). One-third (33%) reported a high level of confidence, which shows no significant change from Q2.
The ratio of average current and ideal backlogs rose two points to 74 from 72 last quarter. This key driver is the closest of the three to its pre-pandemic level: it was 76 in Q1 2020. The average months of backlog increased from 9.2 months in Q2 to 9.4 months. The optimal backlog level on average decreased slightly from 12.8 months to 12.7 months. 41% of contractors reported 6-12 months of backlog and 36% reported less than six months of backlog (the same as last quarter).
Skilled Worker Shortage
Though the CCI data shows the industry moving in a slightly positive direction, the struggle with finding workers remains for many. The majority (92%) of contractors report moderate to high levels of difficulty finding skilled workers, up four points from Q2. The percentage of contractors reporting high difficulty finding skilled workers rose, jumping 10 points to 55%. These are the highest numbers for both these statements since Q3 2020.
Half of contractors report a high degree of concern about their workers having adequate skill levels, up 12 points from last quarter and five points year-over-year. This quarter, fewer contractors reported a moderate degree of concern than in Q2 (42% reported a moderate degree of concern, down from 49% in Q2).
Over a third (42%) report turning down work due to skilled labor shortages, up from 35% in Q2. Almost all (93%) contractors who reported moderate to high concern expect the problem with finding skilled workers will stay the same or get worse in the next six months. Only 4% expect it to improve and 3% are unsure.