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 25, 2018
Construction group uses mobile technology to make highway work zones safer
Mobile advertising campaign urges drivers who routinely pass through certain work zones to slow down and be alert as new data shows motorists are more likely to be injured than construction workers.
Market Data | May 23, 2018
Architecture firm billings strengthen in April
Firms report solid growth for seven straight months.
Market Data | May 22, 2018
Vacancies stable, rents rising, and pipeline receding, according to Transwestern’s 1Q US Office Market report
The Big Apple still leads the new construction charge.
Market Data | May 18, 2018
Construction employment rises in 38 states and D.C. from April 2017 to April 2018
California & West Virginia have biggest annual job gains, North Dakota has largest decline; California & Louisiana have largest monthly pickup, Indiana & North Dakota lead monthly drops.
High-rise Construction | May 18, 2018
The 100 tallest buildings ever conventionally demolished
The list comes from a recent CTBUH study.
Resiliency | May 17, 2018
Architects brief lawmakers and policy-makers on disaster recovery as hurricane season approaches
Urge senate passage of disaster recovery reform act; Relationship-building with local communities.
Market Data | May 17, 2018
These 25 cities have the highest urban infill development potential
The results stem from a COMMERCIALCafé study.
Market Data | May 10, 2018
Construction costs surge in April as new tariffs and other trade measures lead to significant increases in materials prices
Association officials warn that the new tariffs and resulting price spikes have the potential to undermine benefits of tax and regulatory reform, urge administration to reconsider.
Market Data | May 7, 2018
Construction employers add 17,000 jobs in April and 257,000 for the year
Unemployment rate for construction increases slightly compared to year earlier as higher pay levels appears to be attracting people with recent construction experience back into the workforce.
Market Data | May 2, 2018
Construction employment increases in 245 metro areas between March 2017 & 2018, as trade fights & infrastructure funding shortfalls loom
Houston-The Woodlands-Sugar Land, Texas and Weirton-Steubenville, W.Va.-Ohio experience largest year-over-year gains; Baton Rouge, La. and Auburn-Opelika, Ala. have biggest annual declines.