WASHINGTON, D.C., Dec. 16 – The backlog of commercial and industrial construction projects reached 10.3 months in the South, the highest reading in the history of the Construction Backlog Indicator (CBI), according to third-quarter results announced today by Associated Builders and Contractors. Nationally CBI remained virtually unchanged at 8.5 for the quarter, although it has declined by 3.5 percent year-over-year, indicating that the nonresidential construction backlog has stabilized at a high level.
“Nonresidential construction remains one of the nation’s leading engines of economic growth,” said ABC Chief Economist Anirban Basu. “Industry spending is up 11 percent on a year-over-year basis, and the most recent backlog indicator strongly suggests that construction volumes will continue to recover. Unlike prior years, both the private and public sectors are now contributing to spending growth.
“While rapid economic growth continues to elude America, the economy has been strong enough to produce more than 2.6 million net new jobs over the past year,” said Basu. “Wage growth is poised to accelerate and residential markets continue to improve, with single family activity picking up recently and home prices continuing to edge higher in many communities. This implies ongoing support for commercial construction and stable tax collections or better, which ultimately translates into more public works projects.”
Regional Readings
The South continues to be associated with large-scale projects that help drive the construction backlog higher. During the most recent CBI survey, the South recorded its highest level of backlog in history. In fact, in the history of the series, no region has posted as high a backlog reading as the South’s 10.3 months. Over the past year, the region’s backlog has lengthened by more than a month.
Backlog stands at 8.5 months in the Northeast, a bit higher than it was two years ago. The Northeast continues to be propelled by rebounding professional and financial services sectors. Many cities continue to wrestle with excess supply of office space, however, which has been suppressing new construction.
Led by rapidly expanding technology communities in California, Washington, Oregon and Utah, backlog in the West has expanded briskly over the past two quarters. Tesla’s new factory in Reno has also begun to impact the data. Cities such as San Jose, Los Angeles, Seattle, San Francisco, Phoenix and Portland have all become more active, with permitting data suggesting that construction volume will remain elevated.
Predictably, dynamics are a bit different in the Middle States. Despite significant investment in components of the auto sector, including in industrial facilities, declines in commodity prices have dramatically reduced investment levels in states ranging from North Dakota to Ohio. Backlog in the Middle States now stands at 6.5 months, the lowest regional reading and a level not much different from the beginning of 2011.
Regional Highlights
Year-Over-Year CBI Map of Regions and Backlog Months
Third Quarter 2014 v. Third Quarter 2015
Industry Breakdown
Backlog has been stable or edging higher in each of the three industry categories monitored by ABC – commercial/institutional, heavy industrial, and infrastructure.
Backlog in the infrastructure category stands at 9.9 months, better than the year ago level. This is notable following the rapid growth in backlog for infrastructure-oriented firms in 2014 as a number of states substantially increased their outlays. With indications of progress with respect to funding for the federal government’s Highway Transit Fund and the steadily improving finances of state and local governments, the outlook for this category is the best that it has been in several years.
Backlog in the heavy industrial category stands at 7.1 months despite the loss of investment momentum in the nation’s energy sector. This impressive resiliency is a reflection of the ongoing investment taking place in the nation’s manufacturing facilities as enterprises seek to install the latest technologies and perhaps to increase their respective capital to labor ratios.
Led by growth in healthcare, financial activities, hospitality, and professional services, backlog in the commercial/institutional category stands at more than 8.2 months. Recent job growth has been concentrated in healthcare, professional services, retail, and leisure/hospitality, suggesting growing demand for commercial space.
Industry Highlights
See charts and graphs
Company Size Trends
In the aftermath of the global financial crisis, construction backlog grew most rapidly among the largest construction firms. These were often the firms that had the strongest balance sheets, the most stable insurance relationships, and the most capacity to take on additional work. With the maturing of the recovery, however, a rising number of firms has been participating in the recovery.
Backlog among firms with annual revenues between $30 million and $50 million has expanded for four consecutive quarters and now stands at 9.9 months. Backlog among firms with less than $30 million in annual revenues continues to remain above 7 months, which has been true for nine consecutive quarters. That said, the lengthiest backlog continues to be reported by the largest firms, with companies with more than $100 million in annual revenues collectively reporting a backlog approaching 11.2 months.
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.