Construction Backlog Falls 3.2 Percent in the Fourth Quarter of 2011

The Associated Builders and Contractors (ABC) today released its Construction Backlog Indicator (CBI) for the fourth quarter of 2011. CBI declined 3.2 percent from the previous quarter from 8.1 months to 7.8 months, but is still up 10.9 percent compared to the fourth quarter of 2010. CBI is a forward-looking economic indicator that measures the amount of nonresidential construction work under contract to be completed in the future.

“Overall, the latest CBI numbers indicate a degree of stalling in the recovery of the nation’s nonresidential construction industry, likely due to a combination of the soft patch that developed in the broader economy early last year, a number of seasonal factors and the winding down of federal stimulus projects,” said ABC chief economist Anirban Basu. “But the good news is that given the recent acceleration in economic and employment growth, CBI is positioned to rebound more forcefully during the quarters ahead.

“In addition, the most recent data reflect the ongoing expansion in privately funded construction activity as opposed to the contraction of publicly funded construction,” Basu said. “The nation’s smaller construction firms are gaining an advantage from this shift, in contrast to the decreased construction activity among the larger firms that had benefitted from earlier federal stimulus projects and military base realignment-related construction.”

Regional Highlights
Construction backlog expanded in the Northeast from the third quarter to the fourth quarter, but declined in the South and West, and was essentially unchanged in the Middle States. Construction backlog is higher in every region of the nation compared to one year ago. Companies in the South, some of which are located in high-growth states such as Louisiana, Oklahoma and Texas, reported the lengthiest backlog at 8.9 months, up 14.7 percent from the fourth quarter of 2010.

Analysis
“The disparity between regional construction activity is on the rise,” said Basu. “One year ago, the difference in backlog between the South region, with the lengthiest backlog, and the West region, with the shortest backlog, was 1.98 months. During the fourth quarter of 2011, this gap rose to 2.81 months, with the South reporting a backlog of 8.92 months and the West at 6.11 months.

“The South appears to be the region most positively impacted by rebounding nonresidential construction, largely due to its central importance to the nation’s energy industry,” Basu said. “The West continues to deal with many issues, including the impact of weak residential real estate markets and stressed state fiscal conditions, both of which impact the vitality of broader regional economies.”

For regional trend data go here. To read more about CBI click here