Associated Builders and Contractors (ABC) reports that its Construction Backlog Indicator declined to 8.4 months in October from 9 months in September, according to an ABC member survey conducted from Oct. 19 to Nov. 2. The reading is down 0.4 months from October 2022.
View ABC’s Construction Backlog Indicator and Construction Confidence Index tables for October. View the full Construction Backlog Indicator and Construction Confidence Index data series.
Backlog now stands at its lowest level since the first quarter of 2022. Declines were concentrated among the smallest contractors with less than $30 million in annual revenues. All three other revenue categories experienced an increase in backlog in October.
ABC’s Construction Confidence Index readings for sales, staffing levels and profit margins fell in October. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months.
“While larger contractors continue to disproportionately benefit from a bevvy of megaprojects around the nation, many smaller contractors are feeling the sting of weaker economic fundamentals in struggling commercial real estate segments,” said ABC Chief Economist Anirban Basu. “Smaller contractors are often the ones most dependent on developer-driven activity. With developers facing higher borrowing costs and greater difficulty lining up project financing, backlog among some contractors is beginning to dissipate. This is precisely what ABC economists predicted,
Basu continued: “The vast majority of contractors could boast healthy backlog, especially those working in the manufacturing/industrial, infrastructure, data centre and health care segments. But those tied to the office, shopping centre and multifamily markets are likely experiencing difficulty lining up work. This helps explain declines in the readings for ABC’s Construction Confidence Index in all three dimensions: sales, employment and margins. Each of these readings, however, remains above 50, suggesting that, while industry growth is softening, it has yet to enter contractionary territory.”
Note: The reference months for the Construction Backlog Indicator and Construction Confidence Index data series were revised on May 12, 2020, to better reflect the survey period. CBI quantifies the previous month’s work under contract based on the latest financials available, while CCI measures contractors’ outlook for the next six months. View the methodology for both indicators.
