WASHINGTON, D.C., JUNE 21– Construction backlog among the nation’s largest contractors now stands above 12 months, a record for the series, according to Associated Builders and Contractors (ABC). The biggest firms with the greatest capacity to attract talent have been able to accept work that others have to turn away in a market that has stabilized at a comfortable level but still faces a skilled worker shortage.
Nationally, ABC said its Construction Backlog Indicator (CBI) inched down to 8.6 months during the first quarter of 2016, which represents a decline of 0.8 percent from 2015’s final quarter. CBI has expanded by 2.7 percent on a year-over-year basis, however, which translates into an increase of more than 0.2 months.
“Contractors are no longer becoming busier, rather, the level of activity has stabilized at a reasonably high level,” said ABC Chief Economist Anirban Basu. “Most contractors continue to express satisfaction regarding the amount of work they have under contract. This is of course truer in certain parts of the nation than others.”
“Subcontractors are much busier than they were several years ago, with general contractors reporting greater difficulty securing experienced contractors,” said Basu. “Some construction firms are turning away work for the first time in years. “The recent stabilization of backlog may reflect supply constraints as much as demand stagnation.
“That said, there are indications that certain commercial real estate segments are nearing the end of their development cycle,” warned Basu. “Developers, bankers and regulators have become generally more concerned by the possibility of overbuilding in hotel, office and retail markets. Many developers indicate that the current cycle is much closer to its end than to its beginning. The implication is that for the first time in years, backlog may be poised to decline after recovering massively since early 2010.”
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Regional Readings
Backlog in the Middle States rose briskly during the year’s first quarter. While diminished energy-related activity in North Dakota and other Middle State communities had been constraining regional backlog, industrial markets like Minneapolis and Detroit have begun to hum. That has helped push backlog in the Middle States to roughly 7.6 months, the highest level on record. Foreign investment in industrial construction projects and in purchasing industrial assets has been particularly apparent over the past year. The ongoing strength of the domestic auto sector represents a primary driver.
The South continues to report the lengthiest backlog on average. Regional backlog declined, however, during the first quarter, and is now back to third quarter 2015 levels. Still, many contractors in the South can look forward to many months of continuing activity.
Regional Highlights
Industry Breakdown
Backlog in the commercial/institutional category has barely shifted over the past year. That’s good news since contractors in this segment remain busy and there has yet to be any indication of a meaningful decline in contractual activity. The same can be said for the heavy industrial segment, where backlog has hovered around seven months for more than a year. While infrastructure-related backlog declined during the year’s first quarter, it has been above 11 months for two consecutive quarters, which has never occurred in the history of the series.
Industry Highlights
Company Size Trends
Backlog among the nation’s largest contractors now stands at 12.25 months, surpassing the record of 11.8 set in the previous quarter. These firms have benefitted from large, signature projects in various parts of the nation, which has helped them recruit workers in an industry hungry for human capital—and take on more work.
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.