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Dive brief:
- The construction backlog was reduced to 8.1 months in November, 0.3 months less than in October, according to a survey of builders and associated contractors conducted from November 20 to December 8.
- The backlog of work shrank across all contractor sizes except for companies with more than $100 million in annual revenue, which were also the only group to post year-over-year and month-over-month gains, the report said.
- Contractor confidence, on the other hand, showed a mixed movement. Sales expectations improved in November, although views on profit margins and staffing levels weakened. Still, all three confidence readings remained above 50, indicating expectations for growth over the next six months, according to ABC.
Diving knowledge:
The November data underscores a widening gap between large contractors tied to megaproject work and smaller firms exposed to softer segments of the construction market.
The backlog is now at its lowest level since February 2024, a decline driven mainly by smaller contractors, said Anirban Basu, ABC chief economist. For example, companies with less than $30 million in annual revenue posted their weakest lag readings in more than four years, the release said.
This is largely due to lack of data center work. Fewer than 6 percent of ABC members in the smallest income tier report having data center contracts, compared with 37 percent of contractors with more than $100 million in annual sales, Basu said.
That imbalance has helped insulate larger firms from the broader fall in backlogs, the statement said.
“Despite the narrowing of the backlog, contractors remain generally optimistic that their sales and staffing levels will expand over the next six months,” Basu said in the statement. “At the same time, only 33.6% of contractors expect their profit margins to expand over the next two quarters, the lowest share in more than a year.”
This fall in profit margin expectations is mainly due to the increase in material costsBasu said. Several key material prices have started to rise again after several quarters of relative stability, he said.
