Princeton, N.J. — The Construction Financial Management Association (CFMA) announced the results of its quarterly CONFINDEX survey showing that the overall CONFINDEX reading declined by more than 5 percent during the second quarter and is up less than 2 percent on a year-over-year basis. Overall, CONFINDEX stood at 123 during the second quarter, after increasing to 130 during the year’s first three months.
“It’s not that CFOs are expressing widespread pessimism. Rather, it’s simply that the ebullience that characterized the first quarter was largely reversed during the second,” notes CFMA’s Economic Advisor Anirban Basu.
CONFINDEX (www.cfma.org/confindex) is CFMA’s proprietary confidence index survey of CFOs in the commercial construction sector. It is the only confidence index survey asking the level of confidence from important decision makers in a critical industry of the US economy. CONFINDEX is compiled from four sub-indices measuring critical components of the financial health of a commercial construction company: Business Conditions, Financial Conditions, Current Conditions, and Year-Ahead Outlook. Less than a 100 reading indicates pessimism among the survey participants, while a reading more than 100 indicates optimism among the survey participants.
The Current Conditions Index fell 2.3 percent during the quarter indicating a modest loss in optimism regarding the near-term. This sub-index is the only one to be down on a year-over-year basis. The implication is that some CFOs have begun to see clouds on the horizon. With President Trump’s pro-business agenda continuing to lack legislative momentum, the feeling may be that growing business volume will not countervail the negative impacts of rising materials and labor costs to the extent expected.
Perhaps most revealing, the Year-Ahead Outlook Index declined 9.2 percent, during the second quarter, to 119. During the prior quarter, this sub-index had climbed from 124 to 131. No sub-index sustained as large a quarterly decline as the Year-Ahead Outlook Index, perhaps an indication that many CFOs have concluded that new administration’s pro-business policies will ultimately fall short of seeing the light of day.
“While most industry stakeholders remain firmly fixated on skills shortages, materials prices have also emerged as an increasingly pressing concern,” notes CFMA President & CEO Stuart Binstock. The share of respondents who perceive that materials prices are worse increased from 47 percent during the first quarter to 53 percent during the second. Moreover, 47 percent of respondents expect prices to be slightly or significantly worse a year from now.
Still, the average CFO remains more upbeat than he or she was a year ago. The Year-Ahead Outlook Index is up 7.2 percent from a year ago, which happens to be the largest year-over-year increase in any of the indices.
The next CONFINDEX survey and results will be released in September 2017.