Dive brief:
- The backlog narrowed to nine months in September, although contractor confidence remained high, according to a statement Tuesday from the Associated Builders and Contractors.
- The group’s Construction delay indicator it fell 0.2 months from August’s reading of 9.2 months and was unchanged year-over-year.
- Large contractors felt the drop the most, according to a survey of ABC members conducted Sept. 20 to Oct. 4. Those with revenues of more than $100 million lost 3.2 months compared to August’s lag, falling from 13.8 to 10.6 months.
Diving knowledge:
Despite the shrinking backlog, ABC’s construction confidence reading for sales and staffing levels rose in September, while the reading for profit margins edged down slightly. All three readings remain above the 50 threshold, indicating expectations for growth over the next six months, the statement said.
“Construction continues to defy the downward gravitational pull of tightening credit conditions,” said ABC chief economist Anirban Basu. “Despite high and rising project financing costs, ABC’s contractor members continue to report high backlog, increased employment, increased sales and stable profit margins.”
Construction delay indicator
Builders and associated contractors
However, industry headwinds are growing, said Basu, who cited political dysfunction on Capitol Hill, rising labor costs and persistent supply chain issues along with the rising cost of financing The U.S. economy appears poised to slow further, he said.
“If the past is any indication, construction will eventually catch up in the form of demand dissipation,” he said in the statement. “But economists have been talking about a recession for more than a year, and the industry still shows substantial forward momentum. It remains to be seen whether that momentum can survive the latest challenges.”
Although it eased last month, the South continues to have the longest backlog in the U.S., a trend since October 2021. Over the past year, only the West has seen a growing backlog, ABC said.
