There is cautious optimism in the construction industry given the strong backlog of jobs and orders, and despite a shortage of skilled labor and increased labor costs, according to the Wells Fargo Construction Index for 2023, based on input from industry executives.

Industry sentiment has declined amid economic and supply chain concerns, according to the report, including within distributors and contractors, and across both the residential and non-residential sectors.

"There is a sharp increase in anticipated decline in residential construction in particular for the year ahead," Wells Fargo said. "Those who predict residential construction activity will decrease are more likely to indicate that interest rates are their top cost concern, with inflation impacting the cost of materials and overall profitability as well as delaying projects due to borrowing costs."