Dive Brief:
- The Associated Builders and Contractors' second-quarter 2017 Construction Backlog Indicator (CBI) fell 4.1% from the first quarter to 8.6 months. Despite the small month-over-month decline, year-over-year backlog increased by 1.4% to 0.1 months.
- The Northeast overtook the South to achieve the longest backlog (9.7 months) of any U.S. region in Q2. The infrastructure pipeline grew to 11.7 months, a move the ABC said could be the result of sector consolidation or companies dropping out of that market because infrastructure spending is still weak. Backlog for the largest companies remained healthy, but the smallest firms with no more than $50 million in revenues saw the most growth, partially due to the biggest — and busiest — companies having to turn away work.
- ABC Chief Economist Anirban Basu called the backlog indicator's slight drop in the second quarter "a return to Earth" from Q1's first-ever growth across all categories. The construction recovery, he added, is still underway.
Dive Insight:
The hype around a potential infrastructure program is still strong, despite no solid framework from the administration. The industry still awaits details from the Trump administration about how it will fund the promised $1 trillion infrastructure plan that President Trump, his advisers and his staff have been promoting since before the 2016 election. So far, in his 2018 budget request, he has indicated that the federal government would kick off the program with $200 billion of direct federal spending, which would then spur $800 billion in additional investment.
Featured in his proposal was the key role the private sector would play through public-private partnerships (P3s). In fact, one of the proposals his advisers put together late in the campaign was that the private sector would get an 82% tax credit in exchange for investment in revenue-generating projects like toll roads. As with many P3s, this would allow the government to take advantage of private-sector upfront money and get started on more projects than it could otherwise.
During a meeting with House Democrats late last month, however, President Trump reportedly said that P3s are "more trouble than they're worth" and that private investment would not work as a way to finance major infrastructure projects. Not surprisingly, Democrats were encouraged that the president's plan could resemble the public spending program they have suggested, while Republicans are likely to launch a campaign against such a significant federal commitment of funds.
