Contractor CFO Confidence Falls 6.5% from July through September

Construction industry executives responding to CFMA's third-quarter 2012 Confindex survey said demand for construction and availability of project financing are key concerns. Respondents who reported they were “highly concerned” or “very concerned” about construction demand rose from 41% last quarter to 52%, a sharp increase in the level of concern that would normally be associated with more substantial deterioration in underlying economic conditions.

Forty-one percent of respondents reported being very or highly concerned about availability of financing, an increase from 36% last quarter. Consistent with the discussion above, construction CFOs indicate that concerns regarding demand and financing are fueled by uncertainty surrounding future public policy shifts and the trajectory of the U.S. economy.

The issue of skills shortages became more apparent in this quarter’s survey. During the third quarter, 42% of survey respondents reported that they were very or highly concerned about industry skills shortages, up 5 percentage points from last quarter. The percentage of respondents that are not worried at all fell from 21% last quarter to 16% this quarter. Though construction employment growth has continued to languish, many former construction workers have departed the industry to join economic segments that are adding jobs more briskly, including distribution, manufacturing, retail, and a host of service segments. This has left the industry with a shortage of skilled workers at a time of sluggish recovery.

Profit margins, which are not encompassed in the Confindex indices, also generally reflected slow progress. Thirty-nine percent of respondents reported that their profit margins are either slightly better (33%) or significantly better (6%) relative to last year. Twenty-eight percent reported that profit margins at their companies are about the same, while 25% indicated their profit margins are slightly worse. Eight percent of construction executives reported that profit margins are significantly worse than one year ago. Compared to last quarter, the percentage of respondents reporting that their profit margins are the same as one year ago is down 9%, while those reporting slightly or significantly worse margins is up 6%. Looking ahead, most respondents expect margins to be the same (45%) or slightly better (37%) a year from now. Four percent expect margins to be significantly better. Only 11% expect margins to worsen.

Materials prices improved only slightly during the third quarter. Forty-seven percent of survey respondents reported that materials prices are about the same as one year ago, while 41% report slightly higher prices and 1% reported significantly higher prices. Eight percent report that prices are slightly lower than a year ago. Relative to last quarter, fewer respondents report that prices are slightly or significantly higher compared to last year (42% this quarter vs. 44% last quarter). More respondents indicate that prices are the same or slightly lower (55% vs. 51%). In a year from now, the majority of respondents expect materials prices to be either slightly higher (48%) or the same (37%). Seven percent expect prices to be slightly lower.

• September 2012 CONFINDEX summary report
• June 2012 CONFINDEX summary report