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Construction Backlog Bumps Up in First Quarter

Jul 1, 2010 12:00 PM

Construction Backlog Indicator for first quarter 2010 shows 4.5% increase in construction backlog orders

The first quarter of 2010 showed a 4.5% increase in construction backlog orders to 6.07 months (up from 5.81 months in the fourth quarter of 2009), according to the latest Construction Backlog Indicator (CBI) from Washington, D.C.-based Associated Builders and Contractors (ABC). CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.

Posting even more dramatic results from February to March of this year, the CBI shot up 17%, now standing at 6.05 months. While the CBI rose in all areas of the country except the West during this time, the Northeastern United States is the only region to see a higher backlog when compared to March 2009. “The fact that the CBI is on the rise illustrates that the improvements recently seen in various other indicators, including construction spending, will continue through much of the balance of 2010,” says ABC Chief Economist Anirban Basu. “However, the overall impact of the recession may not be at an end or approaching an end. It remains too soon to tell whether the current momentum will continue through 2011. According to Basu, as an indicator, the nonresidential construction industry tends to lag the overall economy by 12 to 24 months. With the broader economy having been in recovery for the better part of a year — and with stimulus spending still having an impact — Basu expects the backlog to remain stable or better in the months ahead.

“Still, there are many forces at work that suggest that the sector's recovery may not be sustained as stimulus monies are steadily drawn down, and commercial construction remains weak due to high vacancy rates and tight credit,” he says.

Looking at the numbers from a regional perspective (click here to see Map ), the Northeast enjoyed the highest construction backlog at 7.31 months in March 2010. The South and Midwest also experienced a rise in backlog, but are still down compared to the same time last year. In the West, backlog stood at 5.76 months in March 2010, roughly the same level as in August 2009, and has yet to demonstrate significant momentum.

“Overall, the nation's nonresidential construction industry is in the early stages of a rebound, and this is apparent in CBI statistics for the Northeast, South, and Middle States,” says Basu. “However, it appears momentum has stalled in the West, which may be due in part to the prevalence of serious state and local fiscal issues, as well as weak housing market performance.”

SHOCKING STAT OF THE MONTH

Number of points the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell in June, putting the total at 17. After a string of two consecutive monthly gains, builder confidence in the market for newly built, single-family homes fell back to February levels, before the beginning of the home buyer tax credit-related surge.
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Source: National Association of Home Builders

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