U.S. Chamber Study Shows Commercial Construction Industry Poised For Recovery After COVID-19June 24, 2020
Survey results were collected in April, at the height of shutdown restriction, causing the overall Index to plunge from 74 in Q1 to 56 in Q2. The drop reflects the fact that two of the Index’s main indicators — confidence in new business and revenue expectations — both fell 26 points, to 50 and 44, respectively, revealing the severe impact of the coronavirus pandemic on the construction industry.
Very few contractors (16%) express high confidence in the market’s ability to provide new business opportunities in the next 12 months (down from 54% in Q1). Meanwhile, the percentage expecting to see their revenues decrease in the next 12 months spiked to 2% in Q1 to 21% in Q2. However, contractors’ view of their backlog of upcoming projects dropped only a modest three points, remaining consistent with the first half of 2018.
“No industry has been immune to the devastating impact of COVID-19,” said Neil Bradley, U.S. Chamber of Commerce executive vice president and chief policy officer. “However, the commercial construction industry appears poised for a quick recovery and a return to growth. This is good news for the economy and the millions of Americans who work in the industry. Congress can help by continuing to support the economy.”
Despite COVID-19 shutdowns, 60% of contractors report having at least six months of backlog projects (compared to 69% in Q1). More than eight in 10 (83%) say their revenue will increase or remain about the same in the next year. And, three in four contractors say they have moderate or high confidence that the next year will bring sufficient new business opportunities (and in the next two years, that percentage rises to 93%).
This quarter’s Index also reveals that the commercial construction industry is an important employer during the pandemic and is ready to hire more workers. One in three contractors (32%) plan to hire more workers in the next six months, while nearly half (48%) believe their workforce will stay the same. Only 15% expect to employ fewer workers.
The Index also surveyed contractors about how they are adapting their work practices to cope with the coronavirus pandemic.
Construction project delays have had a major impact on the industry, the Index revealed. Eighty-seven percent of contractors report they are experiencing delays due to the coronavirus outbreak. Also, 87% expect delays to continue into the summer and 73% expect delays will remain in the fall.
However, contractors become less concerned about delayed projects as they look to the future. In April, over a third (35%) of contractors reported that at least 75% of their projects were delayed. Asked to look three months ahead, only 16% of contractors expected the same. Looking six months ahead, only 8% expect at least 75% of their projects to be delayed.
Like many other industries, contractors quickly adapted their operations to comply with new safety guidelines. More than nine in 10 contractors (92%) said they changed work procedures to increase social distancing. Contractors also indicated worker health and safety is top of mind. Given a list to choose from of the most severe COVID-19 consequences for their business, three-quarters (75%) said worker health and safety is a top concern, followed by fewer projects (48%), and increases in workforce shortages (33%).
Asked how the pandemic will change how they do business in the future, contractors said adjustments to safety and work procedures would be the top change. They also expect more remote work for their staff and to pay greater attention to contract language.
USG Corporation and the U.S. Chamber of Commerce will hold a free virtual panel discussion on Wednesday, June 24 on COVID-19’s impact on the construction industry. USG Corporation CEO Chris Griffin, U.S. Chamber of Commerce Senior Economist Curtis Dubay, and Association of the Wall and Ceiling Industry CEO Michael Stark will discuss the survey findings and the state of the industry.
Methodology and Headline Results
The Index is comprised of 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 survey was in the field April 4 – 27, 2020.
The Q2 2020 results from the three key drivers were:
- Backlog: The backlog indicator dropped three points to 73 (from 76 in Q1).
- New Business Confidence: The overall level of contractor confidence dropped to 50 (down 26 points from Q1).
- Revenue: Contractors’ revenue expectations over the next 12 months dropped to 44 (down 26 points from Q1).
The research was developed with Dodge Data & Analytics (DD&A) by surveying commercial and institutional contractors.