Q2 of 2022 Marks Strong Business Confidence Among Contractors

Q2 of 2022 Marks Strong Business Confidence Among Contractors

In our latest release, the Q2 2022 Farnsworth Contractor Index, we heard a strong confidence from contractors regarding an ability to get new business in the next 6 months.

Each quarter The Farnsworth Group provides its Contractor Index to the industry, in which we survey hundreds of contractors each quarter to understand their sentiment on current business activity as well as their future expectations and mindsets.

We survey hundreds of residential contractors from five main areas:

- Remodeling Contractors (Remodelers, GCs)

- Exterior Contractors (Roofers, Siding/Window Contractors)

- Finish Contractors (Painters, Flooring Contractors, Carpenters, Drywall)

- Mechanical Contractors (Plumbers, Electricians, HVAC)

- Landscape Contractors (Landscapers, Decking Contractors, Concrete)

Confidence is High Among Contractors

In our latest release of the Q2 2022 Farnsworth Contractor Index, we heard a strong confidence from contractors regarding an ability to get new business in the next 6 months. This increase in confidence in Q2 over Q1 is normal to see, so we like to compare confidence at a year over year level.

This confidence is on par with confidence levels from Q2 of 2021. This confidence is much higher than Q2 of 2020, understandably, as that time was the most tumultuous due to the beginning stages of the response to Covid.

Contractors Have Two Month Backlogs

Contractors are also keeping extraordinarily busy, with results in the 2022 Q2 report keeping on par with results from the second quarter of previous years. Overall, there are positive indications for contractor activity levels right now.

Because contractors are so busy, remodeling project delays continue and new project starts are being delayed commonly by about 2 months.

Understand, still, that demographics of the contractor company, including size of firm and type of work completed, will directly influence the length of backlog for that firm. Larger firms and larger project scopes often correlate to longer backlogs as compared to the shorter backlogs we see reported by smaller firms and smaller project sizes. For example, project backlogs among landscaping contractors sits at an average closer to 5 weeks and contractors performing repair and maintenance work similarly have shorter backlogs.

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At the beginning of 2022, The Farnsworth Contractor Index also began to report on additional market pressures impacting contractors' abilities to successfully operate their business, including,

- Credit Availability

- Material Availability

- Material Cost Stability

Here's more on what we are starting to see regarding those market pressures.

Contractors Are Not Yet Concerned with Credit Availability Tightening

As of the release of the Q2 of 2022 Farnsworth Contractor Index, little concern has been expressed regarding access to credit tightening.

This sentiment was reported before the Federal Reserve’s Interest Rate Decision on June 16th to increase short term borrowing costs for banks by 75 basis points. With the Fed’s June decision and indication that a similar tightening effort will be enacted again when they meet in July, we anticipate contractor confidence for credit availability to decline going into Q3 of 2022.

Material Costs are High, But Perceived As Stable

Everyone buying building materials, home improvement products, and lawn and garden products have been hit by higher prices, from Pros to DIYers alike. What we are measuring in the Farnsworth Contractor Index is how stable prices are across the various trade sectors in order to keep a pulse on the stability that contractors can expect in their project margins. The stability of margins for contractors correlates to their overall confidence, and the predictability of material costs is a large factor for these building products customers.

There is little change among most contractors, with only a big swing in volatility expressed by landscaping contractors. This is most likely due to the seasonality of their services and will be best compared with year over year data as we continue to monitor contractor perceptions in future years.

Access the full Q2 of 2022 report below:

The Farnsworth Contractor Confidence Index, Download