Dive Brief:
- The portfolio was reduced to 8.2 months in August, largely due to the increased cost of financing and project expenses, according to a Sept. 10 statement from Associated Builders and Contractors.
- Only the infrastructure category posted an increase in the portfolio in August, an indicator of continuity strength of public spending in constructionaccording to the report. Meanwhile, the commercial and institutional sectors, which are more sensitive financing conditionswent down in the last month. All three categories are now lower than a year ago.
- “As predicted, confidence among contractors is falling,” said Anirban Basu, ABC’s chief economist. “While ABC’s contractor members are still anticipating expansion in sales and employment, profit margins are increasingly under pressure as project owners face high debt and construction delivery costs in the context of a slowing economy”.
Diving knowledge:
Despite the relative strength of infrastructure projects, the backlog was still down in all major segments over the past year.
Total work in process now trails last year by exactly one month. This has led to growing pessimism among contractors, according to the report.
For example, ABC’s construction confidence index readings for sales, profit margins and staffing levels fell in August. Notably, their profit margin readings also fell below the 50 threshold, meaning contractors no longer expect profit margin growth over the next six months.
This compression of profits could lead to even more postponementsespecially in the south, Basu said. The southern region has lost about 2.3 months of work over the past 12 months, the largest decrease of any region nationally.
The declines were widespread, with almost all sizes of construction companies reporting declines in their portfolios in August, according to ABC. Only companies with annual revenues between $50 million and $100 million managed to increase their backlog over the past month.
