By Robert Dalheim

According to the U.S. Chamber of Commerce’s latest commercial construction index, lumber is currently the highest reported material shortage.  “Over half (54 percent) of contractors report facing shortages for at least one material, up from 45 percent in Q2,” Commerce said in a press release. “Wood and/or lumber is the most reported shortage at 11 percent, up from 5 percent last quarter.” Other key findings include:

  • 62 percent of contractors say cost fluctuations for materials have had a high or moderate impact on their business, up from 59 percent in Q2.
  • 21 percent of those who expressed concern over price changes are worried about lumber. 41 percent are concerned about steel prices, up from 33 percent in Q2.

The Index found that the commercial construction industry is showing signs of rebound. While the overall index score remained fairly steady, increasing by one point to 57 in the third quarter, two of the three main indicators saw increases, pointing to more optimism about the future. Despite the overall gain, the index remains significantly below the score of 74 from the first quarter of 2020. Confidence in new business rose six points to 56 in Q3 from 50 in Q2, while revenue expectations increased four points to 48 in Q3 from 44 in Q2. However, those increases were offset by the third indicator, current backlog, which dropped five points from 73 in Q2 to 68 in Q3 (impact to backlog may lag for several months as projects are delayed). As commercial construction contractors look to the future, 82 percent now have moderate to high confidence that the U.S. market will provide sufficient new business opportunities in the next 12 months, up from 75 percent in Q2. The majority (60 percent) of contractors expect their revenues to remain about the same in the next 12 months (the same as in Q2); 22 percent expect an increase, up from 17 percent in Q2. Job Growth on the Horizon, but Finding Skilled Workers Remains a Challenge Most contractors (57 percent) expect to keep the same number of workers in the next six months, up from 48 percent in Q2; and one in three (32 percent) plan to hire (the same as in Q2). Just 7 percent expect to reduce staffing, down from 15 percent last quarter. At the same time, most contractors (83 percent) report moderate to high levels of difficulty in finding skilled workers. More than one in three (36 percent) contractors who report difficulty also report turning down work because of it, up from 32 percent last quarter. COVID Impact The impact of coronavirus still looms large, but its perceived impact is lessening over time. Nearly all contractors (85%) are still experiencing delays due to the coronavirus outbreak, with 83% expecting delays to continue into the fall and 71% expecting delays will remain through early 2021. However, the average amount of delays has decreased sharply as the year continues. In July, contractors reported an average share of 26% of their projects were delayed, down from 40% in April. Additional findings include: 

  • Worker health and safety remains top concern. Most (70%) contractors say worker health and safety is a top concern for their business. A majority (60%) report more project shutdowns/delays as another top concern.
  • Nearly all contractors (97%) report making changes in response to COVID-19 this quarter, including providing items like masks and sanitizer (82%); changing work procedures to increase social distancing (75%); and allowing remote work for office employees (67%).

About the Index  The Index comprises three leading indicators 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 Q3 2020 results from the three key drivers were: • Backlog: The backlog indicator dropped five points to 68 (from 73 in Q2).• New Business Confidence: The overall level of contractor confidence increased to 56 (up six points from Q2). • Revenue: Contractors’ revenue expectations over the next 12 months increased to 48 (up 4 points from Q2).  

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