AWI e-briefs - 07/25/2019 (Plain Text Version)
Modest Increase in Nonresidential Spending in April
According to an Associated Builders and Contractors’ analysis of U.S. Census Bureau data released June 3, national nonresidential construction spending rose 0.3% in April.
“Remarkably, despite growing shortages of skilled workers and rising compensation costs, the average nonresidential contractor has been able to keep profit margins stable, with a significant proportion able to increase margins slightly,” said Basu. “With bidding opportunities remaining robust and firms still in a position to chase opportunities to bolster revenues and profitability, it comes as little surprise that many contractors continue to hire. ABC’s most recent survey indicates that many more firms expect to expand payrolls in the coming months.
“With the Federal Reserve now actively contemplating rate cuts, construction firms may experience additional support in the form of stepped-up demand,” said Basu. “Presumably a rate cut or two in 2019 would further diminish the cost of capital, positioning more projects to move forward. On the other hand, there is evidence that the U.S. economy has begun to slow, with the pace of job growth slowing recently along with more sluggish indications from measures such as industrial production and capacity utilization. Should the U.S. economy continue to slow through the balance of 2019 and into 2020, it would likely translate into meaningfully softer demand for construction services by 2021 or 2022.”
CCI is a diffusion index. Readings above 50 indicate growth, while readings below 50 are unfavorable.
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