ABC: South posts 'highest level of backlog in history'

Dive Brief:

The 2015 third-quarter backlog of nonresidential construction projects was unchanged from the second quarter’s national figure of 8.5 months, the Associated Builders and Contractors reported. But the South’s backlog, driven by large-scale projects, spiked to 10.3 months — its highest reading in the history of the ABC’s Construction Backlog Indicator.
A year-over-year decline of 3.5% is indicative of stabilization of the nonresidential backlog at a high level, according to the ABC.
In the breakdown of companies, the longest backlogs — 11.2 months — still belong to the largest construction firms, those with more than $100 million in annual revenues.

Dive Insight:

The ABC said all sectors are either maintaining or experiencing longer backlogs. Infrastructure came in at an improved 9.9 months, heavy industrial at 7.1 months despite the loss of momentum in the energy sector and commercial/institutional at 8.2 months, driven by growth in healthcare, financial, hospitality and professional services. In addition to the big story in the South, regionally, backlogs in the Northeast are at the national average of 8.5 months, the West is at 8 months, and the Midwest claims the lowest regional reading of 6.5 months, due to a decline in commodity-related investments.

"Nonresidential construction remains one of the nation’s leading engines of economic growth," ABC Chief Economist Anirban Basu said in a release. "Industry spending is up 11% 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."

The ABC said that, in the West, the Tesla gigafactory is beginning to have an impact on the CBI, although it doesn’t provide the numbers. Construction of the gigafactory is ahead of schedule, and Storey County, NV, where the factory is located, reports business licenses are up 41%, with most for the trades and construction.

In the company size breakdown, the ABC said companies of every size continue to be impacted by the skilled labor shortage. There is no doubt, they said, that the lack of enough skilled workers has limited backlog growth in recent quarters, with a growing number of firms having to turn down work.

Although there have been encouraging employment numbers in recent months, the experts chalk those gains up to workers leaving softening industries like energy and manufacturing. They also cite an increase in wages as a potential draw to the industry.

The aging workforce and lack of younger workers coming into the industry continue to plague analysts and construction professionals, and most agree that government and the private sector must take action soon to increase the flow or new workers in the pipeline.