Dive brief:
- The construction backlog was reduced to 8.3 months in December, a slight decrease compared to November, according to a survey of Associated Builders and Contractors conducted from December 20 to January 6.
- The commercial and institutional portfolio declined by nearly a month over the past year, hitting its lowest level since February 2023. These categories, which include projects such as retail, offices, hospitals and education, contrast with the infrastructure portfolio , which hit its highest point since August. 2023.
- ABC’s construction confidence index continues to show growth expectations for sales and staffing, although profit margins fell slightly, the report said.
Diving knowledge:
The slight decline in the backlog highlights persistent challenges for contractors, particularly in the commercial and institutional sectors, where the backlog hit its lowest point in nearly two years.
But contractor confidence paints a more optimistic picture. Builders’ expectations for sales growth are now at their highest level since early 2022. The sentiment reflects contractors’ belief in a short-term recovery of the activityespecially during the first half of 2025.
However, the ABC’s chief economist also warned that the boost could be short-lived, if interest rates remain high.
“If rates remain higher for longer, the backlog may remain narrow, particularly in the distressed commercial and institutional category,” said Anirban Basu, ABC’s chief economist.
The Federal Reserve appears Aggressive rate cuts are unlikely to continue in 2025, according to their most recent meeting in December. This does not bode well for the backlog in general, Basu said.
“Although the backlog gradually eased in December, contractors expect construction activity to pick up in the first half of this year,” Basu said. “Despite this confidence, the path of interest rates will play a critical role in industry performance in 2025.”
