Construction backlog for large contractors reached a new peak of 14.06 months during the second quarter of 2016 according to the Associated Builders and Contractors (ABC) Construction Backlog Indicator (CBI) released today. The new high for companies with annual revenue above $100 million shattered the previous high of 12.25 months for any revenue segment, which was recorded in the first quarter of 2016 and second quarter of 2013.
Nationally, average backlog fell to 8.5 months during the second quarter, down 1.6 percent from the prior quarter. CBI remained virtually unchanged on a year-over-year basis, signaling that growth in the nation’s nonresidential construction industry is slowing.
“There are a number of potential explanatory factors regarding the lack of growth in backlog, the most obvious of which is the continued slow growth of the economy,” says ABC Chief Economist Anirban Basu. “Financial regulators have begun to express growing concern regarding possible bubbles forming in certain real estate segments in certain cities, which may have rendered the developer financing environment somewhat more challenging. A slowdown in business investment, including in energy-related sectors, has undoubtedly also played a role.”
Regional Highlights
- Contractors in the South have reported average backlog in excess of 10 months for fourth consecutive quarters. Backlog in the South has never been higher than it has been over the past year, with significant activity reported in several South Carolina, Georgia and Florida markets.
- Backlog in the West expanded during the second quarter, with contractors in Seattle, Portland, Boise and in a number of California markets reporting still expanding backlog. Many contractors report both more private and public contracting as local governments scramble to accommodate rapidly expanding populations.
- Backlog in the Middle States hit the eight-month threshold, the highest level recorded in the history of the series. The expansion of the U.S. auto sector appears to be disproportionately responsible.
Sector Highlights
- Average backlog in the heavy industrial category rose to 7.4 months during the second quarter, the highest level on record. The U.S. auto industry appears to be largely responsible, with contractors in Mississippi, Tennessee, Indiana and other significant auto supply markets reported stable to rising backlog levels.
- Backlog in the infrastructure category declined for a second consecutive quarter during the second quarter, but remains well above 10 months. Only on two occasions have infrastructure contractors reported higher backlog. However, the impact of the passage of a federal highway bill last year has been generally less than anticipated.
Highlights by Company Size
- Backlog for firms with revenue less than $30 million—the smallest delineation—declined by 0.1 months in the second quarter and has now fallen during five of the previous seven quarters. These firms are among the most likely to be limited by skilled labor shortfalls, which prevent them from effectively bidding on larger projects, thereby setting the stage for gradual declines in backlog.
- A softening of backlog in the northeast helps to explain the year-over-year decline in backlog among firms in the $30-$100 million annual revenue category.
- Large industrial projects represent a primarily explanatory factor behind the surge in backlog among the largest construction firms. Large-scale industrial projects have been reported in Texas, Louisiana and other markets, setting the stage for stable to rising construction investment in those markets. Over the past two years, construction volumes have been falling in a number of Texas and Louisiana markets, likely attributable to diminished oil and natural gas prices.
Related Stories
Codes and Standards | Feb 24, 2022
Most owners adapting digital workflows on projects
Owners are more deeply engaged with digital workflows than other project team members, according to a new report released by Trimble and Dodge Data & Analytics.
Market Data | Feb 23, 2022
2022 Architecture Billings Index indicates growth
The Architectural Billings Index measures the general sentiment of U.S. architecture firms about the health of the construction market by measuring 1) design billings and 2) design contracts. Any score above 50 means that, among the architecture firms surveyed, more firms than not reported seeing increases in design work vs. the previous month.
Market Data | Feb 15, 2022
Materials prices soar 20% between January 2021 and January 2022
Contractors' bid prices accelerate but continue to lag cost increases.
Market Data | Feb 4, 2022
Construction employment dips in January despite record rise in wages, falling unemployment
The quest for workers intensifies among industries.
Market Data | Feb 2, 2022
Majority of metro areas added construction jobs in 2021
Soaring job openings indicate that labor shortages are only getting worse.
Market Data | Feb 2, 2022
Construction spending increased in December for the month and the year
Nonresidential and public construction lagged residential sector.
Market Data | Jan 31, 2022
Canada's hotel construction pipeline ends 2021 with 262 projects and 35,325 rooms
At the close of 2021, projects under construction stand at 62 projects/8,100 rooms.
Market Data | Jan 27, 2022
Record high counts for franchise companies in the early planning stage at the end of Q4'21
Through year-end 2021, Marriott, Hilton, and IHG branded hotels represented 585 new hotel openings with 73,415 rooms.
Market Data | Jan 27, 2022
Dallas leads as the top market by project count in the U.S. hotel construction pipeline at year-end 2021
The market with the greatest number of projects already in the ground, at the end of the fourth quarter, is New York with 90 projects/14,513 rooms.
Market Data | Jan 26, 2022
2022 construction forecast: Healthcare, retail, industrial sectors to lead ‘healthy rebound’ for nonresidential construction
A panel of construction industry economists forecasts 5.4 percent growth for the nonresidential building sector in 2022, and a 6.1 percent bump in 2023.