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Project Backlog Drops by 1 Month YoY in July

Monday, August 17, 2020

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Construction backlog, according to the Associated Builders and Contractors, decreased in July by a full month year over year, and decreased .3 months since June for an indicator of 7.8 months.

This data is according to the ABC’s Construction Backlog Indicator, from an ABC member survey conducted from July 20 to Aug. 5.

The Data

From June to July, the backlog fell by most metrics, including:

  • Commercial and institutional – from 8.2 to 7.6;
  • Infrastructure – from 10 to 9.2;
  • Northeast states – from 8.5 to 8.4;
  • South states – from 8.9 to 8.3;
  • West states – from 8.7 to 6.5;
  • Company size of $30 million or less – from 7.8 to 7.3; and
  • Company size of $100 million or more – from 12 to 10.2.
photovs / Getty Images

Construction backlog, according to the Associated Builders and Contractors, decreased in July by a full month year over year, and decreased .3 months since June for an indicator of 7.8 months.

The metrics in which the backlog rose included:

  • Heavy industrial – from 5.2 to 8.2;
  • Middle states – from 6.7 to 7.2;
  • Company size of $30-50 million – from 6.7 to 7.5; and
  • Company size of $50-100 million – from 8.9 to 10.5.

“Additionally, confidence among U.S. construction industry leaders declined in July regarding sales, staffing levels and profit margins,” according to ABC’s Construction Confidence Index.

“Sales and profit margin expectations are below the threshold of 50, indicating ongoing expectations of contraction. Less than 29% of contractors expect their profit margins to increase over the next six months, while greater than 47% expect shrinking profit margins over that period.”

  • The CCI for sales expectations decreased from 51.1 to 47.2 in July;
  • The CCI for profit margin expectations decreased from 47 to 42.7; and
  • The CCI for staffing level expectations decreased from 56 to 50.6.

“Many contractors are quickly working through existing backlog,” said ABC Chief Economist Anirban Basu. “Because the virus remains deeply problematic and many communities are rolling back reopening plans, the partial economic rebound observed in May and June is set to flatten. The implication is that while many contractors will continue to work through backlog for the balance of 2020, it may be difficult to secure work for 2021, as fewer projects are bid out and project starts become increasingly rare.

“There are exceptions, of course,” said Basu. “Backlog in the heavy industrial category has increased and many contractors are reporting more activity in fulfillment and data center construction as the e-commerce boom persists. But with project financing becoming increasingly challenging and with state and local governments in rough fiscal shape, the nonresidential construction environment is not shaping up to be a positive one, absent a meaningful infrastructure package.”

Past Numbers from ABC

An uptick was noted in a report of 8.1 in June. While backlog had increased, that same report found that confidence among U.S. construction industry leaders also increased regarding staffing levels, profit margins and sales in June. However, it projects that over the next six months, profit margins are expected to decline, which falls more in line with the Turner Index.

That profit margin decline is also illustrated by combining the backlog and competitive bidding with the ABC’s recent analysis of U.S. Bureau of Labor Statistics’ Producer Price Index, which showed that nonresidential construction input prices rose by 2.3%—following a rise in prices of .8% in May.

Among the 11 subcategories, six experienced monthly increases, which include:

  • Fabricated Structural Metal Products increased by .6%;
  • Softwood Lumber increased by 11%;
  • Prepared Asphalt, Tar Roofing and Siding Products increased by 1.3%;
  • Crude Petroleum increased by 71.9%; and
  • Unprocessed Energy Materials increased by 16.8%.

The National Association of Home Builders also released lumber numbers earlier this month, noting that the Random Lengths Framing Composite Price hit $523 per 1,000 board feet for the week ending July 10, marking the first-time prices have topped the $500 level since July 2018.

   

Tagged categories: Associated Builders and Contractors Inc. (ABC); COVID-19; Economy; Good Technical Practice; Jobs; Market; Market data; NA; North America

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