Dive Brief:
- Backlog declined to nine months in September even as contractor confidence remained high, according to a Tuesday release from Associated Builders and Contractors.
- The group’s Construction Backlog Indicator fell 0.2 months from August’s reading of 9.2 months and was unchanged year over year.
- Large contractors felt the dip the most, according to an ABC member survey conducted Sept. 20 to Oct. 4. Those with revenue of more than $100 million lost 3.2 months compared to August’s backlog, falling from 13.8 to 10.6 months.
Dive Insight:
Despite the decline in backlog, ABC’s Construction Confidence Index reading for sales and staffing levels edged higher in September while the profit margins reading fell slightly. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months, the release said.
“Construction continues to defy the downward gravitational pull of tightening credit conditions,” said ABC Chief Economist Anirban Basu. “Despite high and rising project financing costs, ABC contractor members continue to report lofty backlog, rising employment, expanding sales and stable profit margins.”
Construction Backlog Indicator
Nevertheless, industry headwinds are growing, Basu said, calling out political dysfunction on Capitol Hill, rising labor costs and lingering supply chain issues along with the rising cost of financing. The U.S. economy appears ready to slow further, he said.
“If the past is any indication, that will eventually catch up to construction in the form of dissipating demand,” he said in the release. “But economists have talked about recession for more than a year, and the industry still shows substantial forward momentum. It remains to be seen whether that momentum can survive the latest set of challenges.”
Though it declined last month, the South continues to have the lengthiest backlog in the U.S., a trend since October 2021. Over the past year, only the West has experienced increasing backlog, ABC said.
