ABI March 2023: Business conditions improve slightly

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Construction input prices dip 0.1 percent in march with wide variation among key goods and services, adding to uncertainty about future costs

The price of materials and services used in nonresidential construction inched down 0.1 percent from February to March, as plunging fuel prices outweighed increases in the cost of other goods, according to an analysis by the Associated General Contractors of America of government data released today. Association officials said new rules associated with federal funding for a range of infrastructure projects will make it hard for firms to procure materials and may drive bidders away from the projects.

“With materials costs fluctuating so much month-to-month, contractors remain wary about committing to projects with unpredictable costs and lead times,” said Ken Simonson, the association’s chief economist. “While inflation in the broader economy is settling back to earth, construction costs keep hitting updrafts.”

ABC’s Construction Confidence Index reading 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. “The deceleration in nonresidential construction activity may have started,” said ABC Chief Economist Anirban 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.

“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.”

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