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ABC: Project Backlog Slips in Most Metrics

Wednesday, October 21, 2020

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Associated Builders and Contractors reported last week that its Construction Backlog Indicator fell to 7.5 months in September—a decline of .5 months from the previous month.

According to the Survey, the backlog is 1.5 months lower than in September 2019.

The Numbers

The backlog slipped slightly by most metrics from August to September, including:

  • Commercial & Institutional – from 7.8 to 7.4;
  • Infrastructure – from 9.6 to 7.4;
  • Middle States – from 7.0 to 6.7;
  • Northeast States – from 7.7 to 7.4;
  • West States – from 8.9 to 6.3;
  • Company size of $30 million or less – from 7.4 to 6.9;
  • Company size of $50-100 million – from 9.2 to 7.2; and
  • Company size of $100 million or greater – from 11.4 to 10.1.
photovs / Getty Images

Associated Builders and Contractors reported last week that its Construction Backlog Indicator fell to 7.5 months in September—a decline of .5 months from the previous month.

“ABC’s survey data indicate that we are in the early stages of a nonresidential construction spending downturn,” said ABC Chief Economist Anirban Basu. “With few exceptions, declines in backlog have begun to accelerate across all markets and regions. This has been most pronounced in the West, which is largely a reflection of the many challenges facing California’s economy.

“Predictably, backlog has also declined rapidly in the commercial/institutional segment. In addition, backlog has also declined in the infrastructure category, yet was higher in the heavy industrial category, a segment that is coming back to due to a combination of an inventory rebuilding cycle, surging e-commerce demand and reshoring of production back to America.”

Basu went on to note that nonresidential construction industry sales are expected to be roughly flat for the next six months, but more than a third of contractors expect their sales to decline. But, nothing is expected to trend down.

“Despite ongoing economic uncertainty as the pandemic lingers and winter approaches, staffing levels are expected to grow over the next six months as contractors strive to hold onto their workforce and potentially add to their pool of talent,” Basu said.

Past Numbers

August’s reading rebounded to 8.0, an increase of .2 months from July. At that time some highlights of the Construction Confidence Index included:

  • The CCI for sales expectations increased from 47.2 to 53.0 in August;
  • The CCI for profit margin expectations increased from 42.7 to 47.8; and
  • The CCI for staffing level expectations increased from 50.6 to 54.4.

Previously, ABC’s member survey conducted from July 20 to Aug. 5, showed a decrease in July by a full month year over year, and decreased .3 months since June for an indicator of 7.8 months.

According to Basu, the decrease was attributed to the deeply problematic issues sprouting from the pandemic. The issues included communities rolling back their reopening plans and contractors struggling to secure work as fewer projects are bid out and work continues through backlogs, among others.

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, projected that over the next six months, profit margins would decline, falling 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.

   

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

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