Commercial Construction Index (CCI) drops to lowest point since 2017

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cci index dec 2019

The fourth quarter 2019 USG Corporation and U.S. Chamber of Commerce Commercial Construction Index (CCI) shows confidence levels among contractors are down after a record high last quarter. Labor shortages continue to negatively impact the construction industry, though more than 70 percent of contractors say technology on the jobsite could improve project delivery and labor productivity, and anticipate increasing usage in the coming years.

This quarter, 89 percent of contractors report having at least a moderate level of difficulty finding skilled workers – a finding that has been consistent since the launch of the Index. As a result, contractors say they are asking skilled workers to do more, are challenged to meet schedule requirements, and are putting in higher bids for projects.

“The commercial construction industry is a barometer of the broader economy and contractors are indicating slowing economic and investment activity,” said Neil Bradley, U.S. Chamber of Commerce executive vice-president and chief policy officer.”As we look to 2020, it is clear that to keep the industry and economy growing, we must address our current workforce challenges. We need bipartisan policy solutions from Washington that promote practical and reasonable solutions and better prepare America’s workforce for the jobs of today and tomorrow.”

To address concerns over worker skill levels and availability, the construction industry – historically slow to digitize – is embracing technologies like drones, equipment tagging and augmented/virtual reality to improve project delivery. In fact, 60 percent of contractors already report using select technology on the job site, up six points year-over-year, and 80 percent believe they will be using one of these technologies by 2022.

When asked about the benefits of investing in advanced technologies, most contractors indicated it will improve safety, productivity and meet or reduce project schedules. These numbers are all up year-over-year by at least 12 points.

“The construction industry is changing more rapidly than ever before and advanced technologies present a big opportunity to work smarter, faster and safer – especially when there are millions of construction jobs unfilled,” Christopher Griffin, president and CEO of USG Corporation, said in a statement.

While the overall score this quarter, 71, is lower than previous quarters, it is in comparison to what has been a boom market since the CCI launched in 2017. The instability between Q3 and Q4 might indicate greater uncertainty among contractors about what to expect from the construction market.

The Index comprises 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 the health of the contractor segment on a quarterly basis.

Key Index Drivers
The Q4 2019 results from the three key drivers were:

  • Revenue: Revenue expectations declined to 66 this quarter (from 72 in Q3). Over a third (36%) of contractors expect an increase in revenue in the next 12 months.
  • New Business Confidence: Confidence that the market will provide sufficient new business opportunities slid from 76 down to 72.
  • Backlog: The average current vs. optimal backlog component fell from 82 to 76. The average months of backlog dropped to 9.3 months (from 10.2 months last quarter).

The research was developed with Dodge Data & Analytics.

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