The Dodge Construction Network’s The Civil Quarterly reported that contractors continue to expect an increase in reveal and profit margins, but supply chain issues and a potential economic downturn have slightly lowered expectations going into 2023.
The Civil Quarterly is based on a quarterly survey of civil contractors and engineers. It examines business conditions and includes two unique topics per quarter exploring key trends in this sector.
A survey of civil contractors found that:
- Over half (53%) still expect an increase in revenue in the next 12 months, which has slipped notably since last quarter (66%).
- Nearly half (45%) are expecting increases to their profit margin in the next 12 months, but slightly fewer than last quarter (51%).
The report states that in normal economic conditions, these high levels of profit expectations would be a sign of optimism. However, the drop since last quarter is noteworthy for the “lack of correlation to current data indicating the volume of work.”
The ratio of contractors’ current level of backlog and the level they consider ideal is 97, which suggests they are already near capacity in their volume of work. Furthermore, 77% report high confidence levels in the volume of work shortly.
Contractors, however, are approaching the new year with caution. Nearly 60% of contractors surveyed believe an economic downturn will decrease the number of private projects. This is an increase from the 49% reported at the beginning of 2022. This increase could represent a shift from assuming an economic downturn was a short-term issue to now believing it to be a longer-term one.
Contractors also continue to report supply chain challenges. Nearly all (93%) report that their construction projects have been impacted by fluctuations in the cost of construction materials, and 93% also expect cost increases for construction materials to continue for at least another six months.
Despite economic concerns, signs still show that the market will continue to see high levels of activity. This includes findings from engineers who are both experiencing an overload of a backlog now and the majority of whom (88%) have high confidence that the market will continue to supply them with new work for at least two years.