flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

ABC's Construction Backlog Indicator hits a new high: 2018 poised to be a very strong year for construction spending

Market Data

ABC's Construction Backlog Indicator hits a new high: 2018 poised to be a very strong year for construction spending

 CBI is up by 1.36 months, or 16.3%, on a year-over-year basis.


By ABC | March 19, 2018

Associated Builders and Contractors (ABC) today reported that its Construction Backlog Indicator(CBI) expanded to 9.67 months during the fourth quarter of 2017—its highest level ever and a 2.25% increase from the prior quarter. Backlog records were broken in the Northeast region, the commercial/industrial segment and among firms with $30 to $50 million in annual revenues. CBI is up by 1.36 months, or 16.3%, on a year-over-year basis.

 

 

“During the fourth quarter of 2017, the CBI established an all-time high, breaking records set during both the first and third quarters of last year,” said ABC Chief Economist Anirban Basu. “The implication is that the average nonresidential construction firm entered 2018 with significant momentum. Construction spending is set to be elevated this year under virtually any conceivable scenario.
  
“A confluence of factors has produced this result, including still-expansionary monetary policy and accelerating global growth in much of the world, brisk foreign investment in U.S. commercial real estate, surging business/developer confidence, deregulation of certain key industries, higher energy prices, strong consumer spending, a recovering U.S. manufacturing sector and rising spending in a handful of publicly financed construction categories,” said Basu. “Recently enacted tax reform is likely to serve as an additional tailwind to an already strong construction story. 

“As always, there is reason for some concern. While 2018 is likely to be a solid year for construction spending, there are grey clouds emerging from the silver linings. A trade dispute with Canada has helped push softwood lumber prices higher. Recently announced tariffs on steel and aluminum may have similar effects. Indeed, inflationary pressures are building in various elements of the economy, including wages, health care, homes, apartments and tuition. The result is an increasingly inflationary economy likely to produce higher interest rates over time,” said Basu. “Should interest rates rise too quickly, backlog is likely to eventually decline as fewer developments are green-lighted due to higher borrowing costs.”

 

 

Highlights by Region

Backlog in the South fell 2.9% during the fourth quarter, but remains nearly 15%higher on a year-over-year basis. Southern markets such as Orlando, Atlanta, Nashville, Dallas and Austin continue to be associated with significant construction momentum. The storms of several months ago also have helped lift backlog in Houston and other impacted communities.  


Backlog in the Northeast expanded for a fifth consecutive quarter as cities like Boston, New York and Philadelphia continue to experience brisk commercial investment. The region’s backlog has expanded by nearly 23% during the past year and now stands at its highest recorded level.

Backlog in the Middle States rebounded during the fourth quarter after declining during the prior two quarters. The 9.5% quarterly increase represented the largest quarterly increase in any of the four regions.

Backlog in the West continued to rise during the fourth quarter, but still stands at just 7 months. The 2017 California wildfire season, which was the most destructive on record and burned nearly 1.4 million acres, likely stalled a certain volume of construction projects and suppressed fourth quarter backlog.  

 

Highlights by Industry 

Backlog in the commercial/institutional segment expanded briskly for a second consecutive quarter. At 10.1 months, the segment’s average backlog is at its highest level in the history of the series.  

Average backlog in the heavy industrial category fell for a third consecutive quarter. At 5.2 months, the segment’s backlog is down 5.2% on a quarterly basis and 5.8% on a year-over-year basis. CBI has neatly predicted recently observed declines in construction activity related to U.S. manufacturing. 

Backlog in the infrastructure category inched up to 12.55 months during the fourth quarter, the highest reading on record for the segment. Improving state and local government finances are helping spur additional public construction, including in the education, public safety, highway/street and transportation categories.

 

Highlights by Company Size

Large firms, those with annual revenues in excess of $100 million, have experienced skyrocketing backlog during the past year. The combination of large-scale commercial/mixed-use development and stepped up public construction activity has produced an average backlog approaching 14.6 months. Backlog for the nation’s largest nonresidential construction firms is up an astonishing 35% during the past year. 

Backlog among firms with annual revenues between $50 million and $100 million fell by 0.8 months in the fourth quarter and currently stands at a still-healthy 10.73 months. Backlog for this category is at its second highest level since the late stages of 2013.  
Firms with $30 million to $50 million in annual revenues experienced their fifth consecutive quarter of rising backlog. The fourth quarter reading of 11.89 months surpasses the third quarter of 2012 as the highest on record. 

Backlog for firms with annual revenues below $30 million increased by 0.4% during the fourth quarter and remains remarkable steady. For the past three years, backlog for this category has remained in a tight range between 7.2 months and 8.1 months. It is conceivable that the lack of pronounced growth in backlog for this group is due to a lack of available workforce. The lack of a reliably available workforce renders it difficult for smaller firms to commit to the larger-scale projects that would pump up backlog. 

 




CBI is a leading economic indicator that reflects the amount of construction work under contract, but not yet completed. CBI is measured in months, with a lengthening backlog implying expanding demand for construction services. More CBI charts and graphs are available on abc.org.

Related Stories

Multifamily Housing | Aug 12, 2016

Apartment completions in largest metros on pace to increase by 50% in 2016

Texas is leading this multifamily construction boom, according to latest RENTCafé estimates.

Market Data | Jul 29, 2016

ABC: Output expands, but nonresidential fixed investment falters

Nonresidential fixed investment fell for a third consecutive quarter, as indicated by Bureau of Economic Analysis data.

Industry Research | Jul 26, 2016

AIA consensus forecast sees construction spending on rise through next year

But several factors could make the industry downshift.

Architects | Jul 20, 2016

AIA: Architecture Billings Index remains on solid footing

The June ABI score was down from May, but the figure was positive for the fifth consecutive month.   

Market Data | Jul 7, 2016

Airbnb alleged to worsen housing crunch in New York City

Allegedly removing thousands of housing units from market, driving up rents.

Market Data | Jul 6, 2016

Construction spending falls 0.8% from April to May

The private and public sectors have a combined estimated seasonally adjusted annual rate of $1.14 trillion.

Market Data | Jul 6, 2016

A thriving economy and influx of businesses spur construction in downtown Seattle

Development investment is twice what it was five years ago. 

Multifamily Housing | Jul 5, 2016

Apartments continue to shrink, rents continue to rise

Latest survey by RENTCafé tracks size changes in 95 metros. 

Multifamily Housing | Jun 22, 2016

Can multifamily construction keep up with projected demand?

The Joint Center for Housing Studies’ latest disection of America’s housing market finds moderate- and low-priced rentals in short supply.

Contractors | Jun 21, 2016

Bigness counts when it comes to construction backlogs

Large companies that can attract talent are better able to commit to more work, according to a national trade group for builders and contractors.

boombox1
boombox2
native1

More In Category




halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021