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Procore Construction Industry Outlook 2018: January to June

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With 2018 upon us, Procore decided to have a look at what we may expect in the coming months. This calls for the inaugural release of the Procore Construction Industry Outlook (PCIO), which analyses the expectations within the construction sector for the next six months.

The PCIO is based on surveys carried out among construction industry leaders from across the U.S, and the responses are used to generate diffusion indices. The bigger the value, the better the results; values above 50 represent the signs of optimism.

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Procore Construction Industry Outlook 2018: January to June

  1. 1. Procore Construction Industry Outlook (PCIO): Eight Predictions for Early 2018 With 2018 upon us, Procore decided to have a look at what we may expect in the coming months. This calls for the inaugural release of the Procore Construction Industry Outlook or PCIO, which analyses the expectations within the construction sector for the next six months. The PCIO is based on surveys carried out among construction industry leaders from across the U.S, and the responses are used to generate diffusion indices. The bigger the value, the better the results; values above 50 represent the signs of optimism. The analysis deals with eight crucial topics: 1 > Backlog 2 > Profit Margins 3 > Revenues 4 > Construction Materials Prices 5 > Worker Compensation 6 > Apprenticeships 7 > Investment in Worker Training 8 > Availability of Skilled Labor Based on survey data, the construction spending cycle is set to continue as we enter 2018, with firms reporting plentiful backlog and the accompanying increases in costs. 67PCIO Score 16.38% RISE SIGNIFICANTLY 48.28% RISE MODESTLY 22.41% REMAIN UNCHANGED 12.93% DECLINE MODESTLY 0.00% DECLINE SIGNIFICANTLY The average company is getting busier. It is remarkable taking into consideration the nation is already in its ninth year of recovery, and the construction cycle does not show signs of abating. Over the next six months, do you expect your backlog to: 1 > B A C K L O G
  2. 2. 3 > R E V E N U E S 12.93% RISE SIGNIFICANTLY 56.03% RISE MODESTLY 22.41% REMAIN UNCHANGED 7.76% DECLINE MODESTLY 0.86% DECLINE SIGNIFICANTLY 4 > 73 8.62% RISE SIGNIFICANTLY 75.00% RISE MODESTLY 16.38% REMAIN UNCHANGED 0.00% DECLINE MODESTLY 0.00% DECLINE SIGNIFICANTLY .1 All is looking good in terms of revenues. Well over half of the surveyed firms expect them to rise over the next six months. Only one in twelve believes their revenues are going to decline. Over the next six months, do you expect your revenues to: Construction materials prices are set to rise over the next six months, according to survey respondents. However, the respondents remain positive as three in four indicate the rise will be modest. Over the next six months, do you expect construction materials prices to: PCIO Score PCIO Score 68.1 C O N S T R U C T I O N M AT E R I A L S P R I C E S 59 6.03% RISE SIGNIFICANTLY 37.93% RISE MODESTLY 44.83% REMAIN UNCHANGED 10.34% DECLINE MODESTLY 0.86% DECLINE SIGNIFICANTLY .5 Despite rising materials and compensation costs, the ratio of firms expecting margins to rise to those expecting them to fall is roughly four to one. Over the next six months, do you expect your profit margins to: PCIO Score 2 > P R O F I T M A R G I N S
  3. 3. 6 > A P P R E N T I C E S H I P S 10.34% RISE SIGNIFICANTLY 39.66% RISE MODESTLY 37.07% REMAIN UNCHANGED 12.07% DECLINE MODESTLY 0.86% DECLINE SIGNIFICANTLY 7 > 64 11.30% RISE SIGNIFICANTLY 38.26% RISE MODESTLY 47.83% REMAIN UNCHANGED 2.61% DECLINE MODESTLY 0.00% DECLINE SIGNIFICANTLY .6 Apprenticeship programs continue to receive more attention, with half of the respondents expecting the number of construction-related apprenticeships to rise over the next six months. This is an interesting finding, considering the number of job openings in construction right now and the issues with apprentice recruitment. Over the next six months, construction-related apprenticeships across the nation will: Apprenticeships tend to be industry-wide efforts. Nevertheless, companies are also trying to expand the supply of human capital. Given the dearth of available talent, it’s not surprising that roughly half of businesses expect to step up investment in their worker training programs over the next six months. Only under three per cent expect to invest less in worker training. Over the next six months, your investment in worker training programs will: PCIO Score PCIO Score 61.6 I N V E S T M E N T I N W O R K E R T R A I N I N G 5 > W O R K E R C O M P E N S AT I O N 3.45% RISE SIGNIFICANTLY 38.79% RISE MODESTLY 56.03% REMAIN UNCHANGED 7.86% DECLINE MODESTLY 0.86% DECLINE SIGNIFICANTLY Despite the ongoing and intensifying concerns when it comes to shortages of construction talent, the vast majority of construction firms expect worker compensation to either remain unchanged or rise only modestly over the next six months. Over the next six months, do you expect worker compensation to: PCIO Score 60.8
  4. 4. Conclusion Procore’s inaugural Construction Industry Outlook indicates that the construction spending cycle remains in full force. There are still plenty of bidding opportunities for construction companies, helping to bolster backlog and revenues. The respondents are not quite as optimistic when it comes to profit margins. Mostly due to the rising compensation and materials costs. Still, the diffusion index margins remains above 50; more construction firms expect margins to increase than decrease. The industry’s major challenge continues to take the form of a dearth of skilled labor. This issue has been emerging for years but has never been so serious. With the elevated retirement and a lack of talent entering various construction trades, the number of posts that need to be filled is not getting smaller. Although the surveyed companies expect a rise in investment in apprenticeship and firm-specific training programs, three-quarters believe securing skilled talent will become even more onerous during the early stages of 2018. 8 > 0.86% RISE SIGNIFICANTLY 8.62% RISE MODESTLY 14.66% REMAIN UNCHANGED 59.48% DECLINE MODESTLY 16.38% DECLINE SIGNIFICANTLY However, even with the plans to expand apprenticeship programs and accelerate firm- specific training, three in four construction firms expect that skilled labor will become even scarcer over the next six months. Over the next six months, finding skilled labor will become: PCIO Score 29.5 S K I L L E D L A B O R AVA I L A B I L I T Y

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