Dive brief:
- The construction backlog edged up to 8.2 months in March, the first gain this year, according to a statement Tuesday from the Associated Builders and Contractors.
- However, seen from a wider perspective, it was only a nominal improvement. According to the report, the portfolio remains down 0.5 months compared to March 2023.
- “Last month, contractors reported an increase in the backlog and greater conviction about likely growth in sales, employment and profit margins,” said Anirban Basu, chief economist at ABC. “Given headwinds such as high borrowing costs, emerging supply chain issues, project financing challenges and labor shortages, persistent optimism among construction contractors is not residential is amazing.”
Diving knowledge:
While the backlog remains narrow in 2024, ABC’s construction confidence index for sales, profit margins and staffing levels posted gains in March after a slight slowdown in February. The index continues to indicate expectations for contractor growth over the next six months, according to ABC.
“This indicates that, though construction service provision costs continue to rise, contractors collectively enjoy enough pricing power to support stable margins on the rise,” Basu said. “If interest rates start to come down over the summer as expected, it is confidence is likely to continue to rise.”
Until then, however, the backlog may have a steep climb on the road to improvement, as the latest data reflects.
The overall backlog of work shrank in March for all contractor sizes except those with less than $30 million in annual revenue. In addition, delinquency levels remain lower over the past year for all regions except the middle states, which now have the second-highest backlog levels of any region in the US.
According to the report, the South continues to lag the most despite a large decline over the past year.
