Commercial Construction Could Be Rebounding: US Chamber

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Is commercial construction recovering? Maybe. The U.S. Chamber of Commerce Commercial Construction index for the third quarter rose to 57 from 56 in the second quarter.

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That qualifies as “statistically unchanged,” the Chamber conceded, and is far below the score of 74 back in the first quarter. But in a wider context, the group interpreted the latest number as a sign of a possible rebound in the commercial construction sector.

The reason isn’t bravado, but rather that two of the index’s key drivers are up in the third quarter. Confidence about new business increased by six points, from 50 to 56, and revenue expectations rose four points, from 44 to 48, in the most recent quarter.

Only the third indicator, current backlog, dropped from 73 in the second quarter to 68 in the third. The Chamber pointed out that “impact to backlog may lag for several months as projects are delayed.”

The mood among commercial construction contractors might be the most positive aspect to this newest index: 82 percent of them have “moderate to high confidence” that the U.S. market will provide adequate new business opportunities over the next 12 months. That’s an increase from 75 percent in the second quarter.

Most contractors (60 percent) expected their revenues to remain about the same over the next 12 months—the same proportion as in the second quarter.

A materials world

A second-half 2020 construction outlook by JLL drilled into construction material prices, and noted that while average prices were generally down since the start of the year—mostly from decreased demand—lumber and plywood have bucked that trend, rising by 4 percent from June 2019 to June 2020.

Though the new U.S. Chamber of Commerce index found substantial concern over lumber prices, twice as many contractors—41 percent—were worried about steel prices. Overall, 54 percent of contractors, versus 45 percent in the previous quarter, reported that they confront shortages for at least one material.

The JLL outlook drew on multiple information sources—a mix of leading indicators for the construction industry and confidence indexes. Among the former are the Architecture Billings index from the American Institute of Architects and information on construction starts from Dodge Data & Analytics.

As of late June, the AIA index saw the rate of decline in architectural services slow, although the overall level of billings remains low enough to put the sector in bad shape. Last month, Dodge reported that though total construction starts fell in July by 7 percent from the previous month, nonresidential building starts increased by 3 percent.

Read the full report on the U.S. Chamber of Commerce’s website.