MONDAY, JANUARY 22, 2024
Earlier this month, the Associated Builders and Contractors released both their Construction Backlog Indicator and Producer Price Index data for December, revealing a slight increase in backlog as material prices fall.
According to the ABC member survey conducted Dec. 20 to Jan. 4, the CBI increased to 8.6 months in December from 8.5 months in November. The reading is also down 0.6 months from December 2022.
The South, which reportedly remains the region with the lengthiest backlog, posted the largest monthly increase in December. Only the West, which historically reports the lowest backlog of any region, experienced a monthly decline, the association explains.
The backlog revealed an increase in numbers in several sectors, including:
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| Chris Ryan / Getty Images |
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Earlier this month, the Associated Builders and Contractors released both their Construction Backlog Indicator and Producer Price Index data for December, revealing a slight increase in backlog as material prices fall. |
The backlog fell in a few sectors, including:
The Infrastructure industry remained stagnant at 7.9 for the month, as did the Northeast region at 8.0.
“Collectively, contractors experienced an uptick in optimism during the holiday season,” said ABC Chief Economist Anirban Basu. “Credit conditions eased a bit during the last days of 2023 as the Federal Reserve indicated that its next set of moves will be to reduce borrowing costs.
“That may have rendered project financing a bit easier, translating into both improved backlog and more optimism regarding sales, employment and profit margins for the for the first half of 2024.”
The ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels also increased in December. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months.
“Still, there remains cause for concern,” said Basu. “Recent data indicate that wage pressures persist, which makes it more likely that interest rates, and therefore project financing costs, will remain higher for longer.
“Geopolitical instability appears to be on the rise, raising the probability of a major conflagration that could further impact supply chains and potentially cause steep increases in certain energy prices.”
Looking at construction input prices, the ABC analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data found that these prices decreased 0.6% in December compared to the month prior.
Overall construction input prices are reportedly 1.2% higher than a year ago, while nonresidential construction input prices are 1.6% higher.
“Construction input prices fell sharply in December,” said Basu. “While plunging oil prices are the primary factor behind the sharp decline, most input prices were tame in 2023’s final month.
“That serves as a fitting end to a year during which aggregate input prices increased just 1.2% and many individual commodity prices actually fell.”
Prices were found to have decreased in two of the three energy subcategories last month, including crude petroleum input prices down 13.2% and unprocessed energy materials down 9.1%. However, natural gas prices rose 1.5% in December.
“Despite continued materials price moderation and other positive developments regarding inflation, the outlook is not without risks,” said Basu.
“Piracy in the Red Sea and the resulting diversion of ships from the Suez Canal around the Cape of Good Hope has caused global freight rates to nearly double in the first two weeks of 2024, according to the Freightos Baltic Index. All else equal, rising shipping costs will put upward pressure on certain inputs.”
Tagged categories: Associated Builders and Contractors; Associated Builders and Contractors Inc. (ABC); Building materials; Business conditions; Construction; Contractors; Economy; Good Technical Practice; Market; Market data; Market forecasts; Market trends; Program/Project Management; Projects - Commercial
