Construction Industry Pushes Forward Despite Mixed Economic News

Posted by , GSP Marketing on April 4, 2023
GSP Marketing

The Construction MMI (Monthly MetalMiner Index) released in March showed the industry is moving forward despite mixed signals to start in 2023.

“Month-over-month, the Construction MMI (Monthly MetalMiner Index) broke out of its sideways trend and rose amid both positive and negative construction news,” wrote Jennifer Kary for MetalMiner, which tracks the construction index.

Construction relies on metal and the industry was digesting mixed price moves:

  • Positive: Bar fuel surcharges were lower.
  • Negative: H-beam steel and U.S. shredded scrap steel were up slightly.
  • Mixed: Some sources reported global rebar prices rising, but others have steel rebar futures falling.

“In the case of h-beam steel, possible inventory restocking and higher steel prices continue to impact current prices,” wrote Kary.

Of course, the construction industry is tied closely to the loan sector and insiders are keeping a wary eye on the SVB bank collapse that left commercial real estate and construction folks on edge.

Contractors Keep an Eye on Bank Failures, Interest Rates

The Construction Dive reported in March that pressure on America’s banks is fueling uncertainty in financial markets, causing concerns of a spillover to overall construction activity.

“After the closures of Silicon Valley Bank and Signature Bank last week, questions surfaced about how those collapses could impact the construction industry,” wrote Sebastian Obando in Construction Dive.

Construction industry experts expect credit lines to tighten, making it more difficult to secure loans in the coming months.

“[It’s] important for construction companies to build cash reserves and maintain a certain level of liquidity,” Greg Ross, industry manager partner at Grant Thornton, a Chicago-based accounting firm, told Construction Dive. “Make sure you have some diversity in your investments where you are able to react quickly.”

Another topic of concern for the construction industry is the U.S. interest rate as the Federal Reserve continues its efforts to reign in high inflation with the possibility of one or two more rate hikes in 2023.

“With the likely tightening of financial conditions given the growing stress on America’s banks and ongoing efforts by the Federal Reserve to rein in excess inflation, commercial real estate and construction are likely to weaken further during the year ahead,” Anirban Basu, Associated Builders and Contractors (ABC) chief economist told Construction Dive. “The current moment is, above all else, defined by uncertainty.”

Construction Confidence Index Inches Higher in First Quarter

The ABC’s Construction Index for sales inched higher in March, while the readings for profit margins and staffing levels fell.

“All three readings remain above the threshold of 50, indicating expectations of growth over the next six months,” said the ABC.

Construction Confidence Index numbers:

  • Sales

o   March 2023: 61.3

o   February 2023: 61.2

o   March 2022: 65.0


  • Profit Margins

o   March 2023: 53.8

o   February 2023: 55.8

o   March 2022: 50.2


  • Staffing

o   March 2023: 62.6

o   February 2023: 62.8

o   March 2022: 66.1


“The deceleration in nonresidential construction activity may have started,” said Basu. “With widespread fears of recession, credit conditions tightening and more decision-makers turning their attention to cost containment, new construction work may be more difficult for contractors to line up.”

In March 2023, some 56.7 percent of contractors expected sales to be up in the future compared to 66 percent a year ago.

“While the confidence and backlog data weakened in March, they indicate a slowing of activity rather than a shift into reverse,” said Basu. “There is a widely held view that financial conditions are tightening in the aftermath of the failures of Silicon Valley Bank and Signature Bank. To the extent that this is true, one could anticipate further slowing and less industry confidence during the months ahead.”

The ABC reported on April 11 that its Construction Backlog indicator declined to 8.7 months in March, a reading slightly better than a year earlier (8.3 months), but the lowest level since August 2022.

“Backlog is down on a monthly basis in every region except for the South, which continues to be associated with elevated levels of current and future construction activity,” said the ABC news release.

Construction Backlog indicator by industry, region, and company size:

  • Industry

o   Commercial and Institutional: 9.3 months (a year ago 8.6 months)

o   Heavy industrial: 8.8 months (a year ago 6.3 months)

o   Infrastructure: 7.1 months (a year ago 8.2 months)


  • Region

o   Middle states: 7.3 months (a year ago 7.5 months)

o   Northeast: 8.0 months (a year ago 8.6 months)

o   South: 11.4 months (a year ago 9.7 months)

o   West: 7.9 months (a year ago 6.3 months)


  • Company Size

o   Under $30 Million: 7.5 months (a year ago 7.7 months)

o   $30 to $50 Million: 11.2 months (a year ago 8.4 months)

o   $50 to $100 Million: 14.4 months (a year ago 9.6 months)

o   Over $100 Million: 12.9 months (a year ago 13.8 months)


Construction Industry Nets Nearly 200K Jobs in Past Year

In other construction industry news, ABC reported in early April that 9,000 jobs on net in March were lost, but on a year-over-year basis, industry employment has grown by 196,000 jobs, an increase of 2.5%.

Nonresidential construction employment fell by 1,800 positions on net in March, with declines in 2 of the 3 subcategories. Nonresidential specialty trade lost 6,100 positions, while the number of nonresidential building jobs decreased by 2,800. Heavy and civil engineering added 7,100 net new jobs.

The construction unemployment rate declined to 5.6 percent in March. Unemployment across all industries decreased from 3.6 percent in February to 3.5 percent last month.

“The March employment report may hint at growing economic weakness in the months to come,” said Basu. “While the nonresidential construction industry lost fewer than 2,000 jobs, the addition of jobs in publicly financed construction categories masks more substantial weakness in private segments. It is precisely those private segments that tend to be most affected by slowing economic growth, deteriorating confidence, and concerns regarding the nation’s banking system.”

Overall, all construction sectors had added jobs over the last 12 months including:

  • Construction Total: Up 2.5 percent
  • Nonresidential Total: Up 3.3 percent
  • Nonresidential Building: Up 4.2 percent
  • Nonresidential Specialty Trade Contractors: Up 2.9 percent
  • Heavy and Civil Engineering: Up 3.6 percent
  • Residential Total: Up 1.4 percent
  • Residential Building: Up 2.3 percent
  • Residential Specialty Trade Contractors: Up 1.1 percent

Topics: Construction