ABC: Construction backlog rebounds in Q3 with gains in commercial, industrial sectors

Dive Brief:

Driven by the commercial-industrial sector, the backlog of nonresidential construction projects rose 2% to 8.7 months in the third quarter, bouncing back from first quarter and second quarter losses, according to the latest Construction Backlog Indicator from the Associated Builders and Contractors. Year over year, construction industry backlog rose 2.2%.
Infrastructure backlog rose for the first time this year, 2.3% to 11.05 months, while commercial-institutional rose 3.7% to 8.3 months. Heavy industrial dropped more than 11% to 6.6 months, sending that category back to early 2014 levels.
Despite a 1% decrease, the South’s backlog remains well above the 10-month mark. The Middle States (+4.1% to 8.3 months) and the Northeast (+6.6% to 7.6 months) saw healthy increases in backlog in the third quarter, while the West fell to early-2015 figures.

Dive Insight:

Stabilization of the energy industry has helped to boost the Middle States backlog, while that sector's still-low prices have also contributed to auto industry-related construction, according to the ABC. Large projects keep the South performing well, while less construction activity by technology companies has negatively affected the backlog in the West.

Consumer-related construction projects like office space, hotel and healthcare drove commercial-institutional up despite more stringent lending criteria in the commercial real estate segment. General growth in the manufacturing sector could put heavy industrial back on a path to a stronger future backlog, and President-elect Donald Trump’s well-publicized plans to increase infrastructure spending — if they come to fruition — could reverse 2016’s decline in public utility and transportation projects as well.

For the first time since the first quarter of 2015, the backlog for companies with $100 million-plus revenue slipped. The lack of infrastructure projects and a reduction in medium-range public contracts left companies with $30 million to $50 million in revenue the biggest losers of the quarter. The smallest companies — those with revenues of less than $30 million — saw a slight increase in backlog, and the ABC said this segment has shown "remarkable stability." This could be a result of owners finally increasing spending on maintenance of existing facilities.

The ABC predicted earlier this week that nonresidential construction growth should slow in 2017, but, despite rising operational costs, an uptick in consumer confidence still should drive construction spending up at least 3.5% next year. Despite the slight change in the construction environment, companies are still staying busy — even if they’re not as optimistic as they have been in recent years, according to the ABC report.