The USG Corp. and the U.S. Chamber of Commerce, along with Dodge Data & Analytics, released the 2020 Q2 Commercial Construction Index, a quarterly economic index that gauges the outlook for and resulting confidence in the commercial construction industry as reported by contractors across the country.

The findings reveal that the impact of COVID-19 has caused the first major drop in the index since its launch in 2017 and is the largest quarterly decline in index history, with confidence in the construction market and revenue expectations both plunging deeply.

Two of the index’s three main indicators — confidence in new business and revenue expectations — both fell 26 points, to 50 and 44, respectively, revealing the severe impact of the coronavirus pandemic on the construction industry. However, the third indicator, backlog, dropped only a modest three points, remaining consistent with the first half of 2018. Survey results were largely collected in the month of April, at the height of shutdown restrictions.

The overall drop in the index stemmed in part from the fact that very few contractors (16%) now express high confidence in the market’s ability to provide new business opportunities in the next 12 months (down from 54% in Q1), and there was a 30 percentage point drop in contractors expecting their revenues to increase (17% in Q2 from 47% in Q1). Meanwhile, the percentage expecting to see their revenues decrease in the next 12 months spiked from 2% in Q1 to 21% in Q2.

Nevertheless, several survey findings suggest the commercial construction industry is poised for recovery. Contractors still have significant backlog, with 60% reporting they have at least six months of backlog (compared to 69% in Q1). More than eight in 10 (83%) say their revenue will increase or remain about the same in the next year, and three in four contractors say they have moderate or high confidence that the next year will bring sufficient new business opportunities (in the next two years, that percentage rises to 93%).

This quarter’s index also reveals that the commercial construction industry is an important employer and is ready to hire more workers. One in three contractors (32%) plan to hire more workers in the next six months, while nearly half (48%) believe their workforce will stay the same. Only 15% expect to employ fewer people.

When the survey was taken in April 2020, the majority (87%) of contractors reported they were currently experiencing delays due to the coronavirus outbreak, with 87% expecting delays to continue into the summer, and 73% expecting delays will remain in the fall.

However, contractors become less concerned about delayed projects as they look to the future. In April, more than a third (35%) of contractors reported that at least 75% of their projects were delayed. Asked to look three months ahead, only 16% of contractors expected the same. Looking six months ahead, only 8% expect at least 75% of their projects to be delayed.

Contractors quickly adapted their operations to comply with new safety guidelines. More than nine in 10 contractors (92%) said they changed work procedures to increase social distancing, and indicated worker health and safety is top of mind. Given a list to choose from of the most severe Covid-19 consequences for their business, three-quarters (75%) said worker health and safety is a top concern, followed by fewer projects (48%), and increases in workforce shortages (33%).

Asked how the pandemic will change how they do business in the future, contractors said adjustments to safety and work procedures would be the top change. They also expect big changes in more remote work for their staff along with paying greater attention to language used in contracts.

The Q2 2020 results from the three key drivers were:

• Backlog —The backlog indicator dropped three points to 73 (from 76 in Q1).
• New Business Confidence — The overall level of contractor confidence dropped to 50 (down 26 points from Q1).
• Revenue — Contractors’ revenue expectations over the next 12 months dropped to 44 (down 26 points from Q1).

The research was developed with Dodge Data & Analytics (DD&A), the leading provider of insights and data for the construction industry, by surveying commercial and institutional contractors.

Click here to see the full report, methodology, and graphics.