Backlog Dips as Contractors Remain Confident

THURSDAY, FEBRUARY 15, 2024


The Associated Builders and Contractors recently reported that its Construction Backlog Indicator declined 0.2 months to 8.4 months in January.

According to the ABC member survey, conducted from Jan. 22 to Feb. 4, the reading is down 0.6 months from January last year.

The association explains that the backlog increased to 10.9 months in the heavy industrial category, the highest reading on record for that category, and is 2.5 months higher than in January 2023. The backlog, however, is down on a year-over-year basis in the commercial/institutional and infrastructure categories.

“As predicted, performance in the nonresidential construction sector is becoming more disparate across segments,” said ABC Chief Economist Anirban Basu.

“For much of the pandemic recovery period, contractors in virtually all segments were indicating stable to rising backlog. That remains the case for contractors most exposed to the nation’s industrial production. Reshoring and near-shoring continue to drive construction spending.”

The backlog revealed an increase in numbers in a handful of sectors, including:

  • the Heavy Industrial industry, from 8.4 to 10.9;
  • the Northeast region, from 8.0 to 8.7;
  • the South region, from 10.7 to 11.4; and
  • the greater than $100 million company size, from 10.7 to 13.0.

The backlog fell in several sectors, including:

  • the Commercial and Institutional industry, from 9.1 to 8.6;
  • the Infrastructure industry, from 7.9 to 7.3;
  • the Middle States region, from 8.5 to 7.2; 
  • the West region, from 6.6 to 5.3;
  • the less than $30 million company size, from 7.4 to 7.2;
  • the $30-$50 million company size, from 11.1 to 9.2; and
  • the $50-$100 million company size, from 12.3 to 10.9.

“In other categories, however, including those most interest rate-sensitive, activity appears to be slowing,” said Basu. “Developer financing has become both more expensive and more difficult to obtain over roughly the past year, in part because of rising office vacancy in many markets.

“That helps to explain declining backlog in the commercial category. The decline in infrastructure-related backlog may be due only to seasonality, however. There is every reason to believe that contractors specializing in public works will have a very busy year.”

The Construction Confidence Index readings for sales and staffing levels reportedly increased in January, while the reading for profit margins declined. That said, all three readings remain above the threshold of 50, indicating expectations for growth over the next six months.

Other Recent ABC News

Earlier this week, the association also released an artificial intelligence technology guide for the construction industry. The guide reportedly includes definitions, construction use cases and considerations.

According to the ABC, the purpose of the guide is to provide a level of knowledge to ensure contractors can be active participants in the construction AI conversation.

“ABC helps members realize the potential of AI, which helps contractors complete projects on time, minimize staffing challenges, save money and improve health and safety,” said Matt Abeles, ABC vice president of construction technology and innovation.

“The construction industry is faced with a steep worker shortage of more than half of a million in 2024, and promising technologies like AI can help address this challenge.

“As younger workers become industry leaders, we must approach AI in construction as beneficial with a balanced view that includes continuous evaluation, developing ethical guidelines and increasing awareness about what AI can and cannot do.”

“The possibilities of AI technology may sound endless, but we must first educate ourselves on the basics, and this resource is a starting point to understand AI and its potential impact on the construction industry,” said ABC Director of Construction Technology and Innovation Patrick Scarpati, who authored the guide.

“The industry has immense opportunities to evaluate how we can better deliver projects, and we can lean on AI in achieving essential goals like upskilling, workforce development, knowledge transfer, supply chain optimization, enhanced safety design and planning and much more.”

The guide reportedly describes uses of AI during the construction project lifecycle, including preconstruction, construction and building maintenance. It also offers definitions of terms, such as deep learning and predictive AI, as well as best practices in drafting office AI policies.

   

Tagged categories: Associated Builders and Contractors; Associated Builders and Contractors Inc. (ABC); Business conditions; Construction; Contractors; Economy; Good Technical Practice; Market; Market forecasts; Market trends; NA; North America; Program/Project Management; Projects - Commercial

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