Construction backlog fell by 4 percent during the last quarter of 2016, according to the latest Construction Backlog Indicator (CBI) released today by Associated Builders and Contractors (ABC). Contractors in each segment surveyed—commercial/institutional, infrastructure and heavy industrial—all saw lower backlog during the fourth quarter, with firms in the heavy industrial segment experiencing the largest drop, down 16.8 percent to an average backlog of 5.5 months.
Overall, backlog—the amount of work under contract but yet to be performed—fell to 8.3 months during the fourth quarter. CBI rose a modest 0.4 months or 4.5 percent on a year-over-year basis.
“Many factors contributed to the dip in contractors’ backlog, but none is more important than the lack of public construction spending momentum,” said ABC Chief Economist Anirban Basu. “Indeed, backlog among firms specializing in infrastructure has declined from 12.2 months during the final three months of 2015 to 10.6 months one year later.
“CBI is intended to be a predictive tool and has accurately predicted declining public spending for several quarters,” said Basu. “Recent construction spending data supplied by the U.S. Census Bureau confirm these declines. For instance, between January 2016 and January 2017, construction spending in the nation’s highway and street segment declined by more than 10 percent. In the water supply, public safety and transportation components, the level of construction spending declined by closer to 11 percent. In the sewage and waste disposal category, construction spending declined by a whopping 28 percent.
“A still fragile global economy, strong U.S. dollar, and stubbornly low energy prices have helped to translate into declining heavy industrial backlog,” said Basu. “The only category experiencing construction spending stability is the commercial segment. Over the past year, construction spending in office, lodging and relative categories has surged. During that same period, the CBI reading in the commercial/institutional category has remained stable.”
Regional Highlights
- Backlog declined in all major regions of the nation during 2016’s final quarter with the exception of the Northeast. A surge in financial activity and foreign investment in commercial real estate helped buoy construction in the New York metropolitan area, according to available CBI survey data. Boston continues to be propelled by its large and expanding technology sector. Stable economies in both Washington and Baltimore have also helped to drive Northeast CBI higher.
- Middle States backlog sits at roughly 7.8 months. Though this represents a decline on a quarterly basis, backlog is still more than a month higher than it was a year ago. Stable-to-rising industrial production in a number of Middle States communities has helped.
- Backlog in the West declined during the fourth quarter and is now at its lowest level since the first quarter of 2015. The region’s backlog has now fallen in four of the previous five quarters, largely due to dynamics among large construction firms. The technology boom in many communities, including in Silicon Valley and Seattle, has led to massive construction projects in recent years. It was expected that this level of technology-generated construction would slow a bit, and this appears to be what has transpired.
- Backlog in the South fell during 2016’s final quarter, ending a prolonged period of growth that began during the third quarter of 2015. Despite this setback, backlog in the southern region remains elevated due to the volume of construction in several of the region’s most economically dynamic major metropolitan areas, including Dallas, Atlanta, Orlando and Miami.
Highlights by Industry
- Foreign and domestic equity capital, searching for a satisfactory combination of safety and yield, has continued to flow into U.S. commercial real estate.
- Average backlog in the heavy industrial category fell to 5.5 months during the fourth quarter, a decrease of more than 1 month. Backlog in the segment has reverted to early-2014 levels, almost 2 months later than its peak in the second quarter of 2016.
- Backlog in the infrastructure category contracted in the fourth quarter but remains well above its post-recession trough. Despite falling 13.2 percent from the same time last year, backlog in the sector is up 49.8 percent from the fourth quarter of 2013.
- Commercial/institutional backlog fell to end 2016, but the sector remains remarkably stable. The category’s backlog reading has hovered between 8 months and 8.3 months for the past two years.
Company Size Trends
- Backlog for firms with annual revenues above $100 million fell dramatically to end 2016 with contractors shedding nearly three months of backlog on average, dropping from 13.7 months to 10.8 months. The CBI reading for this group is now at its lowest level since the second quarter of 2015.
- Backlog for the smallest firms surveyed—those with annual revenues less than $30 million—remains stable. Many of these companies are subcontractors that continue to toil on privately-financed, commercial construction projects.
- Firms with annual revenues between $30 million and $50 million per annum were in the only category that collectively reported rising backlog. These firms are often advantageously positioned to take on large components of commercial or institutional work, and backlog for this group now stands at a still-healthy 8.3 months.
- Backlog among firms with between $50 million and $100 million in annual revenue fell fractionally during the final quarter, not enough for statistical significance. Though backlog has declined relative to the peak achieved in mid-2013, in part due to the loss of public infrastructure spending momentum, average backlog remains above 9 months.
Click here to view additional charts and graphs.
Related Stories
Self-Storage Facilities | Jan 5, 2024
The state of self-storage in early 2024
As the housing market cools down, storage facilities suffer from lower occupancy and falling rates, according to the December 2023 Yardi Matrix National Self Storage Report.
Designers | Dec 25, 2023
Redefining the workplace is a central theme in Gensler’s latest Design Report
The firm identifies eight mega trends that mostly stress human connections.
Contractors | Dec 12, 2023
The average U.S. contractor has 8.5 months worth of construction work in the pipeline, as of November 2023
Associated Builders and Contractors reported today that its Construction Backlog Indicator inched up to 8.5 months in November from 8.4 months in October, according to an ABC member survey conducted Nov. 20 to Dec. 4. The reading is down 0.7 months from November 2022.
Market Data | Nov 27, 2023
Number of employees returning to the office varies significantly by city
While the return-to-the-office trend is felt across the country, the percentage of employees moving back to their offices varies significantly according to geography, according to Eptura’s Q3 Workplace Index.
Market Data | Nov 14, 2023
The average U.S. contractor has 8.4 months worth of construction work in the pipeline, as of September 2023
Associated Builders and Contractors reported that its Construction Backlog Indicator declined to 8.4 months in October from 9.0 months in September, according to an ABC member survey conducted from Oct. 19 to Nov. 2. The reading is down 0.4 months from October 2022. Backlog now stands at its lowest level since the first quarter of 2022.
Multifamily Housing | Nov 9, 2023
Multifamily project completions forecast to slow starting 2026
Yardi Matrix has released its Q4 2023 Multifamily Supply Forecast, emphasizing a short-term spike and plateau of new construction.
Contractors | Nov 1, 2023
Nonresidential construction spending increases for the 16th straight month, in September 2023
National nonresidential construction spending increased 0.3% in September, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.1 trillion.
Market Data | Oct 23, 2023
New data finds that the majority of renters are cost-burdened
The most recent data derived from the 2022 Census American Community Survey reveals that the proportion of American renters facing housing cost burdens has reached its highest point since 2012, undoing the progress made in the ten years leading up to the pandemic.
Contractors | Oct 19, 2023
Crane Index indicates slowing private-sector construction
Private-sector construction in major North American cities is slowing, according to the latest RLB Crane Index. The number of tower cranes in use declined 10% since the first quarter of 2023. The index, compiled by consulting firm Rider Levett Bucknall (RLB), found that only two of 14 cities—Boston and Toronto—saw increased crane counts.
Market Data | Oct 2, 2023
Nonresidential construction spending rises 0.4% in August 2023, led by manufacturing and public works sectors
National nonresidential construction spending increased 0.4% in August, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.09 trillion.