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 | May 21, 2020
7 must reads for the AEC industry today: May 21, 2020
'Creepy' tech invades post-pandemic offices, and meet the new darling of commercial real estate.
Market Data | May 20, 2020
6 must reads for the AEC industry today: May 20, 2020
A wave 'inside' a South Korean building and architecture billings continues historic contraction.
Market Data | May 20, 2020
Architecture billings continue historic contraction
AIA’s Architecture Billings Index (ABI) score of 29.5 for April reflects a decrease in design services provided by U.S. architecture firms.
Market Data | May 19, 2020
5 must reads for the AEC industry today: May 19, 2020
Clemson's new mass timber building and empty hotels as an answer for the affordable housing shortage.
Market Data | May 18, 2020
5 must reads for the AEC industry today: May 18, 2020
California's grid can support all-electric buildings and you'll miss your office when it's gone.
Market Data | May 15, 2020
6 must reads for the AEC industry today: May 15, 2020
Nonresidential construction employment sees record loss and Twitter will keep all of its office space.
Market Data | May 15, 2020
Nonresidential construction employment sees record loss in April
The construction unemployment rate was 16.6% in April, up 11.9 percentage points from the same time last year.
Market Data | May 14, 2020
5 must reads for the AEC industry today: May 14, 2020
The good news about rent might not be so good and some hotel developers consider whether to abandon projects.
Market Data | May 13, 2020
House democrats' coronavirus measure provides some relief for contractors, but lacks other steps needed to help construction
Construction official says new highway funding, employee retention credits and pension relief will help, but lack of safe harbor measure, Eextension of unemployment bonus will undermine recovery.
Market Data | May 13, 2020
5 must reads for the AEC industry today: May 13, 2020
How to design resilient libraries in a post-covid world and vacation real-estate markets are 'toast.'