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
Market Data | Jan 29, 2021
Multifamily housing construction outlook soars in late 2020
Exceeds pre-COVID levels, reaching highest mark since 1st quarter 2018.
Market Data | Jan 29, 2021
The U.S. hotel construction pipeline stands at 5,216 projects/650,222 rooms at year-end 2020
At the end of Q4 ‘20, projects currently under construction stand at 1,487 projects/199,700 rooms.
Multifamily Housing | Jan 27, 2021
2021 multifamily housing outlook: Dallas, Miami, D.C., will lead apartment completions
In its latest outlook report for the multifamily rental market, Yardi Matrix outlined several reasons for hope for a solid recovery for the multifamily housing sector in 2021, especially during the second half of the year.
Market Data | Jan 26, 2021
Construction employment in December trails pre-pandemic levels in 34 states
Texas and Vermont have worst February-December losses while Virginia and Alabama add the most.
Market Data | Jan 19, 2021
Architecture Billings continue to lose ground
The pace of decline during December accelerated from November.
Market Data | Jan 19, 2021
2021 construction forecast: Nonresidential building spending will drop 5.7%, bounce back in 2022
Healthcare and public safety are the only nonresidential construction sectors that will see growth in spending in 2021, according to AIA's 2021 Consensus Construction Forecast.
Market Data | Jan 13, 2021
Atlanta, Dallas seen as most favorable U.S. markets for commercial development in 2021, CBRE analysis finds
U.S. construction activity is expected to bounce back in 2021, after a slowdown in 2020 due to challenges brought by COVID-19.
Market Data | Jan 13, 2021
Nonres construction could be in for a long recovery period
Rider Levett Bucknall’s latest cost report singles out unemployment and infrastructure spending as barometers.
Market Data | Jan 13, 2021
Contractor optimism improves as ABC’s Construction Backlog inches up in December
ABC’s Construction Confidence Index readings for sales, profit margins, and staffing levels increased in December.
Market Data | Jan 11, 2021
Turner Construction Company launches SourceBlue Brand
SourceBlue draws upon 20 years of supply chain management experience in the construction industry.