Associated Builders and Contractors (ABC) recently reported that its Construction Backlog Indicator declined to 7.8 months in July, a decrease of 0.3 months from the June reading, according to an ABC member survey conducted from July 20 to Aug. 5. Backlog is a full month lower than in July 2019 (see Table below).
Additionally, confidence among U.S. construction industry leaders declined in July regarding sales, staffing levels and profit margins, according to ABC’s Construction Confidence Index. Sales and profit margin expectations are below the threshold of 50, indicating ongoing expectations of contraction (see Table below). Less than 29% of contractors expect their profit margins to increase over the next six months, while greater than 47% expect shrinking profit margins over that period.
“Many contractors are quickly working through existing backlog,” said ABC Chief Economist Anirban Basu. “Because the virus remains deeply problematic and many communities are rolling back reopening plans, the partial economic rebound observed in May and June is set to flatten. The implication is that while many contractors will continue to work through backlog for the balance of 2020, it may be difficult to secure work for 2021, as fewer projects are bid out, and project starts become increasingly rare.”
There are exceptions, noted Basu. “Backlog in the heavy industrial category has increased, and many contractors are reporting more activity in fulfillment and data center construction as the e-commerce boom persists,” he said. “But with project financing becoming increasingly challenging and with state and local governments in rough fiscal shape, the nonresidential construction environment is not shaping up to be a positive one, absent a meaningful infrastructure package.”
Click here for historical CCI and CBI data and here for methodology. Visit abc.org/economics for the CBI and CCI reports, plus analysis of spending, employment, GDP and the Producer Price Index.
