According to Associated Builders and Contractors (ABC), the Construction Backlog Indicator (CBI) for the fourth quarter of 2014 declined 0.1 months, or 1 percent. Despite the quarter-over-quarter decline, backlog ended the year at 8.7 months, which is still 4.4 percent higher than one year ago.
“Inconsistent growth in the volume of public work continues to suppress the pace of nonresidential construction; however, private construction momentum continues to build,” said ABC Chief Economist Anirban Basu. “With hotel occupancy rising, office vacancy falling and demand for data climbing exponentially, a number of key private segments are positioned for rapid growth in construction spending this year.
“There are a number of factors that are likely to be beneficial to nonresidential contractors in 2015,” said Basu. “First, although interest rates were expected to rise after the Federal Reserve ended its third round of quantitative easing, they have actually been trending lower—due to factors such as falling interest rates abroad and a strengthening U.S. dollar—which helps contractors with construction volume and borrowing costs. Second, materials prices have continued to fall—particularly inputs related to the price of oil, iron ore and copper. This also makes it more likely that construction projects will move forward and helps boost profit margins.”
Regional Commentary
Average backlog rose in three of four regions, with the West representing a major exception. The declining backlog in the West can partially be explained by ongoing issues at West Coast ports, related economic uncertainty and softening of public construction. The Northeast’s backlog remained above 10 months for the second consecutive month, thanks to Boston’s technology industry, New York’s financial sector, Philadelphia’s diversified economy and Baltimore’s health and defense sectors. Also, Pennsylvania and Maryland are among the states that have raised revenues to help better finance infrastructure work. In the Middle States, where shale-related production has spread to Ohio and Illinois and industrial production has been edging higher, average backlog expanded above 7 months for the first time in the history of CBI.
Regional Highlights
Industry Commentary
Due primarily to a surge of infrastructure projects in the Middle States and Northeast, infrastructure-related backlog rose to almost 10 months during 2014’s final quarter. Average backlog in the heavy industrial segment is up by more than two full months over the past year, a reflection of the surge in industrial production observed nationally since the recession ended in mid-2009.
Industry Highlights
Company Size Commentary
Average backlog remained above 8 months in all four firm size categories during the fourth quarter of 2014. Larger firms continue to register the lengthiest backlog. Firms in both the $30 million-$50 million annual revenue category and the $50 million-$100 million category both registered strong growth in backlog during the fourth quarter. Average backlog among those firms with more than $100 million in annual revenue has declined by nearly half a month over the past year, with the greatest losses being among large firms in the West.
Highlights by Company Size
Note: The reference months for the Construction Backlog Indicator and Construction Confidence Index data series were revised on May 12, 2020. All previously reported quarters and months shifted forward by one period to better reflect the timing of when the surveys were conducted.