Associated Builders and Contractors recently reported that its Construction Backlog Indicator declined to 7.8 months in July, a decrease of 0.3 months from the June reading, according to an ABC member survey conducted from July 20 to Aug. 5. Backlog is a full month lower than in July 2019.
Additionally, confidence among U.S. construction industry leaders declined in July regarding sales, staffing levels and profit margins, according to ABC’s Construction Confidence Index. Sales and profit margin expectations are below the threshold of 50, indicating ongoing expectations of contraction. Less than 29% of contractors expect their profit margins to increase over the next six months, while greater than 47% expect shrinking profit margins over that period.
- The CCI for sales expectations decreased from 51.1 to 47.2 in July.
- The CCI for profit margin expectations decreased from 47 to 42.7.
- The CCI for staffing level expectations decreased from 56 to 50.6.
“Many contractors are quickly working through existing backlog,” said ABC Chief Economist Anirban Basu. “Because the virus remains deeply problematic and many communities are rolling back reopening plans, the partial economic rebound observed in May and June is set to flatten. The implication is that while many contractors will continue to work through backlog for the balance of 2020, it may be difficult to secure work for 2021, as fewer projects are bid out and project starts become increasingly rare.
“There are exceptions, of course,” said Basu. “Backlog in the heavy industrial category has increased and many contractors are reporting more activity in fulfillment and data center construction as the e-commerce boom persists. But with project financing becoming increasingly challenging and with state and local governments in rough fiscal shape, the nonresidential construction environment is not shaping up to be a positive one, absent a meaningful infrastructure package.”
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.
Tags: Associated Builders and Contractors