After hitting what appears to have been rock bottom in June 2009, some portions of the non-residential construction industry may be in store for some much-needed good news going forward. According to recent data from the Associated Builders and Contractors (ABC), Arlington, Va., the nation's Construction Backlog Indicator (CBI) for July rose 8.9% to 6.1 months from 5.6 months in June. The CBI economic indicator gauges the amount of construction work or backlog (measured in time) that companies are contracted to complete in the future.

“While the magnitude of the monthly increase was significant, June was the lowest point for the CBI since ABC began collecting national data in November 2008,” says ABC Chief Economist Anirban Basu. “At that time, the CBI stood at 7.1 months or 14% above its current level of 6.1 months.”

Suggesting that the July data reflects the effects of the stimulus package signed into law in February on the commercial, institutional, industrial, and infrastructure construction segments, Basu expects higher levels of construction spending in the near future, characterizing this projection as “a welcome sign for the industry and the economy at large and an indication that the downturn may be over for the non-residential construction industry — though not in all segments.”

From a regional standpoint, some areas of the country fared better than others when it comes to business backlog ((click here to see Map). For example, compared to June, the average backlog in July rose in the Northeast, Middle States, and the West. However, the Northeast has the shortest backlog (5.5 months). The longest time frame is in the West, where backlog rose 1.4% from 7.1 months in June to 7.2 months in July. Contractors in the Middle States collectively report a backlog of 5.6 months for July, up 21.7% from 4.6 months in June. The South has seen a steady decline, falling 17.2% from 8.7 months in November 2008 to 6.2 months in July 2009.

“The most severe retrenchment in contracting activity since the non-residential construction downturn began last year has been within the financial services on the East Coast and the economically weak South,” says Basu. “Presently, the South is disproportionately represented among the states with the highest unemployment rates, including Florida, Georgia, South Carolina, North Carolina, and Mississippi. This is consistent with falling demand for construction services, and this is the region that has experienced the sharpest decline in backlog since November 2008.”

Industry-wise, only one of three segments of the non-residential construction industry tracked in the survey showed an optimistic forecast. Although the commercial/institutional, heavy industrial, and infrastructure markets all reported an increase in backlog in July relative to June, only infrastructure experienced an increase in average backlog (9.5 months) since November 2008. CBI for both the commercial/institutional and heavy industrial segments remains below 6 months.

Slicing the numbers by company size, backlog totals improved among smaller firms and declined slightly among their larger counterparts. Companies with less than $30 million in revenue registered an increase in average backlog to 4.7 months in June compared to 5.7 months in July. Those with annual revenues between $30 million and $50 million registered an average backlog of 4.7 months in July, up from 4.2 months in June. Conversely, companies with annual revenues in excess of $100 million experienced a slight decline in average backlog from 7.5 months in June to 7.3 months in July. Since November 2008, average backlog is up in only one of the five firm size categories — those with annual revenues between $50 million and $75 million.

“In July, the pre-existing trend shifted as smaller firms appeared to pick up a bit of momentum,” says Basu. “This may be because these firms have been the most eager to line up new work in recent months and aggressive marketing and bidding among this group appear to be reflected in the backlog data. That said, larger firms generally continue to command longer and more stable average backlogs.”