Infrastructure Strength Spurs Backlog Rebound
The Associated Builders and Contractors recently released its Construction Backlog Indicator numbers for the month of April, reporting that the CBI increased slightly.
Previously, in March, the CBI declined to 8.7 months, the lowest level since August 2022.
According to the latest ABC survey, which was conducted from April 20 to May 3, the CBI increased to 8.9 months. The association reports that the backlog rebounded in April due to strength in the Infrastructure category.
Sectors experiencing an increase in backlog included:
The backlog also witnessed decreases in several sectors, including:
“Based on ABC member sentiment, one would not be able to discern that interest rates are high, the nation’s banking sector is in tumult, politicians are arguing over the nation’s debt limit and recession fears remain pervasive,” said ABC Chief Economist Anirban Basu. “Despite many headwinds and an active news cycle, contractors continue to express confidence in the near term.”
The ABC reports that the Construction Confidence Index reading for sales and staffing also moved higher in April. However, the readings for profit margins inched lower.
According to the release, all three readings remain above the threshold of 50, indicating expectations of growth over the next six months.
“Still, there is some evidence of a shift,” said Basu. “With credit conditions tightening, expectations are that private construction is poised for weaker times ahead. Nonetheless, backlog expanded in April, as infrastructure contractors began to take on more public works projects.
“Moreover, despite rapidly rising compensation costs, more ABC contractors expect profit margins to expand as opposed to recede over the next six months, evidence of sufficiently strong demand for construction services to support pricing power."
Rising Material Cost Concerns
Earlier this month, the ABC also reported that construction prices increased 0.2% compared to last month, but have fallen for the second straight month year-over-year.
In its analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data, the association noted that nonresidential construction input prices also rose 0.4% for the month. Overall, prices are reportedly down 1.1% over the past year, while nonresidential construction input prices have fallen 0.8%.
Prices increased in two of the three energy subcategories last month, including crude petroleum prices (14.2%) and unprocessed energy materials (5.2%). However, natural gas prices were down 20.1% for the month.
In analysis of the data by the Associated General Contractors of America, the price of materials and services used in nonresidential construction reportedly increased 0.5 percent from March to April, in what is the largest increase since January.
Additionally, the index for new nonresidential construction, a measure of what contractors report they would charge to put up a specific set of buildings, decreased 0.3%.
Association officials also said that the new Buy America rules are contributing to higher materials prices by limiting what materials contractors can use, “sowing confusion” among state and local officials responsible for enforcing the new measure. They added that “vague and conflicting guidance” on what constitutes an American-made product is adding to the problem.