Dive Brief:
- Construction backlog inched higher to 8.2 months in March, the first gain this year, according to a Tuesday release from Associated Builders and Contractors.
- Viewed from a broader perspective, however, it amounted to only a nominal improvement. Backlog still remains down 0.5 months compared to March 2023, according to the report.
- “Last month, contractors reported rising backlog and greater conviction regarding likely growth in sales, employment and profit margins,” said Anirban Basu, ABC chief economist. “Given headwinds such as high borrowing costs, emerging supply chain issues, project financing challenges and labor shortages, the persistent optimism among nonresidential construction contractors is astonishing.”
Dive Insight:
Even though backlog remains down in 2024, ABC’s Construction Confidence index for sales, profit margins and staffing levels all posted increases in March following a slight slowdown in February. The index continues to indicate contractors’ expectations for growth over the next six months, according to ABC.
“That indicates that though costs of delivering construction services continue to rise, contractors collectively enjoy enough pricing power to support stable to rising margins,” said Basu. “If interest rates begin to decline during the summer as is widely expected, confidence is likely to climb further.”
Until then however, backlog may have a steep climb on the road to improvement, as reflected in the most recent data.
Overall backlog dropped in March for every size of contractor except for those with under $30 million in annual revenue. Additionally, backlog levels remain lower over the past year for every region except for the middle states, which now has the second largest backlog level of any region in the U.S.
The South continues to have the largest backlog despite a large decline over the past year, according to the report.
