WASHINGTON, D.C., Dec. 13– Construction backlog expanded during the third quarter, led by strong growth in the commercial/industrial sector, according to Associated Builders and Contractors’ (ABC) Construction Backlog Indicator (CBI), released today. The increase during the third quarter follows two quarters of decline in backlog—the amount of work under contract but yet to be performed—that led to speculation that growth in the country’s nonresidential construction industry was slowing.
Overall backlog expanded to 8.7 months, up 2 percent from the second quarter and 2.2 percent (0.2 months) on a year-over-year basis.
“Despite growing concern that certain commercial segments in a handful of major U.S. cities are on the path to overbuilding, commercial construction backlog improved during the summer of 2016,” said ABC Chief Economist Anirban Basu. “The ongoing expansion of spending on healthcare has also helped to expand institutional construction volumes.
“However, exports have been sagging in the context of a disappointing global economic recovery and strong dollar,” said Basu. “Business investment in the U.S. has been weak, though there have been more recent indications of improvement. This improvement was not fully apparent in third quarter data, and industrial construction backlog declined during the quarter.
“Perhaps the biggest news is that infrastructure-related backlog is on the rise,” said Basu. “Despite the passage of a federal highway bill in 2015 and a growing consensus that America’s expanding infrastructure deficits must be aggressively countered, infrastructure spending in America has been in decline for much of 2016. According to U.S. Census Bureau data, over the past year public spending has declined in water and sewer categories, the highway and street segment, public safety and in transportation. The rise in backlog suggests that this negative trend will soon turn positive. The outcome of the most recent presidential and congressional elections renders the outlook for near-term infrastructure spending more promising.
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Regional Readings
Backlog in the Middle States expanded on its previous record high by 4.1 percent during the third quarter after struggling to maintain stability as energy prices plummeted. During the early stages of the recovery, higher energy prices resulted in vast amounts of investment in energy exploration and distribution activities. These activities were disproportionately concentrated in the Middle States. Since mid-2014, energy prices have been in general decline, which resulted in reduced energy investment and a concomitant decline in backlog in certain communities. More recently, energy prices have stabilized, which helps explain the recent upticks in regional backlog.
Regional Highlights
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Industry Breakdown
America’s consumer-led economic recovery continues to translate into opportunities for construction firms specializing in office, hotel, distribution center and healthcare segments. Recent data indicate the U.S. manufacturing sector is beginning to regain some of its strength despite a weak global economy and strong U.S. dollar, which will likely translate into higher industrial segment backlog going forward.
Industry Highlights
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Company Size Trends
Backlog at the nation’s largest contractors — those firms with annual revenues in excess of $100 million — decreased for the first time since the first quarter of 2015. That said, backlog among large firms remains near all-time highs. Firms with revenues between $30 and $50 million continued to lose backlog at a rapid rate, a reflection of weakness in the infrastructure category and a lack of mid-sized publicly-financed construction projects generally.
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.