Survey Shows Contractor Outlook Remains Cautious

According to the Air Conditioning Contractors of America (ACCA), a survey of its members showed a slight increase in optimism for their business outlook. Data from the construction industry, one of the prime indicators for the HVAC market, also showed faint signs of improvement, though economists warned that the market is still not stable.

ACCA reported that its Contractor Comfort Index (CCI) for May 2010 inched up just slightly over the prior month. The CCI is a measure of contractor attitudes toward short-term economic growth. The May index was 68, up just three points over 65 in April.

The CCI is calculated based on a survey of the association’s contractor members, who are asked how positive they feel about new business prospects, existing business activity, and expected staffing decisions in the short-term future. Weighted and averaged into one number, a CCI of 50 or above reflects anticipated growth.

“The CCI tool was introduced in February, so we always keep in mind its newness as it builds a picture over time,” said Kevin Holland, ACCA vice president for business operations and membership. “However, as a snapshot of current attitudes, it is clear that ACCA members are putting the cautious in cautiously optimistic.”

He added, “It will be very interesting to see how the index moves throughout the peak cooling season.” The next index number will be released during the last week of June.

Recent reports from the construction industry also showed positive economic indications. According to the Associated Builders and Contractors (ABC), construction backlog has increased in 2010. ABC estimates how much construction work is under contract to be completed in the future. ABC reported that the average backlog in the first quarter of 2010 (6.07 months) was up 4.5 percent compared to the fourth quarter of 2009 (5.81 months).

“However,” ABC chief economist Anirban Basu said, “the overall impact of the recession may not be at an end or approaching an end. It remains too soon to tell whether the current momentum will continue through 2011.” Basu said that the expectation is that backlog will remain stable or better over the next few months, but forces such as tight credit, high vacancy rates, and decreasing stimulus funds may have a negative impact.

Construction employment is also edging up, according to data released by the Bureau of Labor Statistics (BLS). The BLS reported an increase of 26,000 jobs in March and an increase of 14,000 jobs in April. All of these construction jobs were gained in the nonresidential sector. “It is encouraging that a solid majority of states added construction jobs in April and that more states are reporting back-to-back monthly gains,” said Ken Simonson, chief economist of the Associated General Contractors of America (AGC).

But he also cautioned, “Aside from temporary stimulus projects and a fragile housing market, demand for new construction remains depressed for the foreseeable future. As a result, construction employment won’t return to pre-downturn levels for many months.”

Publication date: 06/07/2010

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