Growth Signals and Construction Industry Trends to Watch in 2024
Date Posted: May 30, 2024
Posted In: Discussion, Organizations,
From Denver Business Journal: While the backlog of construction projects has begun to ease, builders and contractors continue to expect the industry to grow over the next six months.
Associated Builders and Contractors surveyed its members in late February/early March and reported a Construction Backlog Indicator of 8.1 months in February, a decrease of 1.1 months from February 2023. Meanwhile, its Construction Confidence Index began to dip, but still showed expectations for growth in sales, profit margins and staffing levels.
“Backlog is declining and confidence began to fade modestly in February,” ABC Chief Economist Anirban Basu said in an announcement when sharing the survey results. “While it is far too early to predict an industry-wide downturn, given that confidence readings continue to signal growth along sales, employment and profit margin dimensions, it appears a rising tide of project cancellations and postponements has begun to make its mark.”
Why construction companies are planning for growth
Commerce Bank, which has a sizable focus on serving the construction industry, is continuing to see its clients plan for growth, according to Nick Hadley, senior vice president for Commerce’s engineering and construction services group. Pandemic-era supply chain issues have eased and a significant infusion of federal infrastructure funding is continuing to lead to active projects.
“Most parties are coming off a really strong 2023,” Hadley said. “They’re looking into 2024 and 2025 with strong backlogs, not only from a revenue threshold, but they’re also in seeing an ability to maintain margins again. This is due to supply chain becoming much more predictable.”
Strategies for managing some of the biggest challenges in construction
Hadley said most construction clients’ two highest concerns are labor and financing. Labor will always be an uphill battle, as it has been for the last two decades. Interest rates are at a historical median level, but higher than what businesses have been used to over the past decade. And hiring and retaining workers remains challenging. The industry employed more than 8.1 million people in February, but has an estimated 414,000 job openings, according to the U.S. Bureau of Labor Statistics.