The Construction Financial Management Association (CFMA) surveys construction management professionals quarterly to assess the outlook of the industry. Respondents are asked eight questions related to:
• Current Business Conditions
• Future (one year) Business Conditions
• Current Bank Credit Availability
• Future (one year) Bank Credit Availability
• Future (one year) Bond Credit Availability
• Line of Credit Status
• Current Backlog
• Future (one year) Backlog
Results are then compiled into a single number – the CONFINDEX index – which is calculated by taking the net of positive responses minus negative responses and adding 100. As the neutral point of this index is 100, a CONFINDEX index less than 100 indicates a negative outlook, while an index greater than 100 would indicate a positive outlook.
The CONFINDEX index for September 2020 came in at 87, the same reading as the prior quarter, and only 10 percent above the all-time low for the index in December 2008.
No doubt the COVID-19 pandemic has contributed to the stagnation of the index. CFMA reports that around half of the construction management professionals surveyed reported there was concern for future demand. Backlogs continue to decline as heavy projection cancellation lingers.
Despite the current anxiety, there are some segments of the industry expected to improve due to the pandemic, including fulfillment centers, datacenters, manufacturing and healthcare. Additionally, as concern for public safety has grown, certain contractors can expect to see an increase in demand for HVAC to improve air circulation, as well remodeling of office spaces to accommodate social distancing.
Additional optimism was recognized as 47% of respondents indicated that their profitability has returned and will have fully recovered within one-to-three years in the current environment.
Looking ahead, a federal infrastructure package may be on the horizon and borrowing costs are expected to remain low, but there’s still concern surrounding a resurgence of the COVID-19 virus and possible renewed economic shutdowns. Only time will tell as to what the impact will be on the construction industry, but a stable CONFINDEX points to more of the current situation.
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