flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

ABC’s Construction Backlog Indicator hits a new high in second quarter of 2018

Market Data

ABC’s Construction Backlog Indicator hits a new high in second quarter of 2018

Backlog is up 12.2% from the first quarter and 14% compared to the same time last year.


By ABC | September 17, 2018

Associated Builders and Contractors reports that its Construction Backlog Indicator expanded to a record 9.9 months during the second quarter of 2018. Backlog is up 12.2% from the first quarter and 14% compared to the same time last year.

“Construction backlog has never been higher in the history of this series,” said ABC Chief Economist Anirban Basu. “While contractors collectively reported a higher backlog, it was the industrial contractor segment that had the largest increase in the second quarter. With industrial production rising and factory capacity utilization recovering, there is more demand for both improved and new industrial space. This was especially apparent among contractors in the southern United States, where backlog stands at 11.2 months and has increased 2.2 months over the past year.  

“The disproportionate role played by technology companies in creating economic growth is also apparent in the data,” said Basu. “Contractors operating in tech-laden communities like San Jose, California; Seattle; Portland, Oregon; Provo/Salt Lake, Utah; and elsewhere continue to report very strong backlog. Given announcements of new, large-scale data centers and tech campuses, technology is positioned to be an ongoing driver of demand for construction services.

“During the first quarter we noted that there had been a significant uptick in survey participation that could have affected our findings due to shifting participant composition,” said Basu. “The second quarter was also characterized by elevated participation levels. It appears that higher participation is now the norm, and that the addition of survey participants has only served to render CBI a more reliable indicator.”

 

Highlights by Region

— Backlog in the South increased by more than one month on a quarterly basis and now sits just below its all-time high established during the third quarter of 2017. Construction backlog expansion continues to be driven by the usual suspects, including rapidly expanding metropolitan areas like Dallas and Austin, Texas; Atlanta; Orlando and Tampa/St. Petersburg, Florida; Charleston, South Carolina; Nashville, Tennessee; and Raleigh-Durham, North Carolina. 

— Backlog in the Northeast rose to its highest level on record. Predictably, backlog growth continues to be led by strong commercial segments in the New York,  Boston, Philadelphia, Washington and Baltimore metropolitan areas. There is also growing evidence of stronger construction activity in West Virginia and western Pennsylvania.

— The exception to the general trend of growing backlog is the Middle States, where backlog is down 0.7 months on a year-over-year basis. Many factors are at work, including relatively softer employment growth in the Chicago, Detroit and St. Louis metropolitan areas. This is the part of the country that is most vulnerable to low agricultural commodity prices, which continue to restrain overall economic performance in states like Iowa and Nebraska.

— Led by technology segments, backlog in the West continues to surge, up by an astonishing 3.9 months over the past year. Contractors in Seattle; Portland, Oregon; San Jose and Los Angeles, California; Denver; Salt Lake City; Boise, Idaho; and Phoenix can expect to remain ultra-busy for the foreseeable future, strongly suggesting that human capital shortfalls will continue to worsen.

Highlights by Industry

— Backlog in the commercial/institutional segment rebounded during the second quarter, increasing to 10.1 months. Backlog in this segment is up more than 20% from the second quarter of 2017. This is remarkable given expectations prevailing a year ago. Back then, many worried that a number of commercial segments had become overbuilt, at least in certain geographies. This suggested that backlog was vulnerable, with fewer new projects moving from the drawing board to construction. Instead, the accelerated growth of the U.S. economy has further bolstered demand for commercial space, driving up the segment’s construction backlog in the process. 

— Backlog in the heavy industrial category reached an all-time high of 7.8 months during the second quarter, a testament to the ongoing expansion of industrial production in the United States. Construction spending related to manufacturing had declined in recent years but exhibited growth during the second quarter. Tariffs, potential trade wars and rising input prices remain risks to this segment’s near-term outlook.

— Backlog in the infrastructure category edged higher during the second quarter to 10.1 months. Despite the lack of a federal infrastructure package, a number of state governments are meaningfully increasing public infrastructure outlays as their finances continue to improve in conjunction with the U.S. economy, now in its 10th year of expansion. Based on U.S. Census Bureau data, construction spending in the water supply category is up 29% on a year-over-year basis, conservation and development (e.g. flood control) by 24%, transportation by nearly 21%, public safety-related spending by 17% and sewage and waste disposal by 11%.

 

Highlights by Company Size

— Large firms with annual revenues in excess of $100 million experienced a sharp increase in backlog. Surging business confidence would have a tendency to result in larger, potentially more risky projects moving forward. This disproportionately inures to the benefit of larger firms with the capacity to handle such projects. This segment’s backlog has increased by 2.4 months over the past year.

— Average backlog among firms with annual revenues between $50 million and $100 million increased by half a month and now stands at 11.6 months. Backlog in this segment has steadily ratcheted higher since a cyclical low experienced during the first quarter of 2016.

— Backlog for firms with between $30 million and $50 million in annual revenues surged 61% during the second quarter. Increased survey participation may be an underlying cause of this segment’s observed construction backlog volatility. However, even if one excludes new entrants to the survey, backlog among this group, which includes many specialty trade contractors, has clearly risen robustly over the past year.

— Backlog for firms with annual revenues of less than $30 million increased to 8.5 months during the second quarter, an all-time high. Backlog in this segment has risen almost precisely by a month over the past year.

Related Stories

Market Data | Jun 12, 2019

Construction input prices see slight increase in May

Among the 11 subcategories, six saw prices fall last month, with the largest decreases in natural gas.

Market Data | Jun 3, 2019

Nonresidential construction spending up 6.4% year over year in April

Among the 16 sectors tracked by the U.S. Census Bureau, nine experienced an increase in monthly spending, led by water supply and highway and street.

Market Data | Jun 3, 2019

4.1% annual growth in office asking rents above five-year compound annual growth rate

Market has experienced no change in office vacancy rates in three quarters.

Market Data | May 30, 2019

Construction employment increases in 250 out of 358 metros from April 2018 to April 2019

Demand for work is outpacing the supply of workers.

Market Data | May 24, 2019

Construction contractors confidence remains high in March

More than 70% of contractors expect to increase staffing levels over the next six months.

Market Data | May 22, 2019

Slight rebound for architecture billings in April

AIA’s ABI score for April showed a small increase in design services at 50.5 in April.

Market Data | May 9, 2019

The U.S. hotel construction pipeline continues to grow in the first quarter as the economy shows surprising strength

Projects currently under construction stand at 1,709 projects/227,924 rooms.

Market Data | May 9, 2019

Construction input prices continue to rise

Nonresidential input prices rose 0.9% compared to March and are up 2.8% on an annual basis.

Market Data | May 7, 2019

Construction costs in major metros continued to climb last year

Latest Rider Levett Bucknall report estimates rise at more than double the rate of 2018 Growth Domestic Product.

Market Data | Apr 29, 2019

U.S. economic growth crosses 3% threshold to begin the year

Growth was fueled by myriad factors, including personal consumption expenditures, private inventory investment, surprisingly rapid growth in exports, state and local government spending and intellectual property.

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