The Associated Builders and Contractors‘ (ABC) Construction Backlog Indicator improved to 7.5 months in January – an uptick of 0.2 months from the December 2020 reading – according to an ABC member survey.
Despite January’s rise, the backlog indicator is still 0.9 months below its reading from the same period a year ago.
In addition, ABC’s Construction Confidence Index reading for staffing and sales levels also both increased in January. Each reading also remained above the index’s threshold of 50, leading to expectations of growth over the next six months, ABC says.
In contrast, the index reading for profit margins slumped below the 50 threshold, dropping to 47.5 in January.
Anirban Basu, chief economist at ABC, says he expects the construction industry to see growth in the months ahead.
“Though nonresidential construction spending has continued to recede for the better part of a year, the growing consensus is that the next six months will be a period of improvement,” Basu says. “While backlog is down substantially from its January 2020 level and profit margins remain under pressure, more than half of contractors expect sales to rise over the next six months and nearly half expect to increase staffing levels.
“The anticipation is that the second half of the year will be spectacular for the U.S. economy from a growth perspective, which will help lift industry fortunes as 2022 approaches,” he adds.
Basu notes, however, public health and supply chain considerations have hindered contractors’ ability to complete projects.
“During the COVID-19 pandemic, many contractors experienced repeated interruptions in project work,” Basu says. “Acquiring key materials and equipment has also become more difficult, with occasional price shocks for certain commodities. With vaccinations proceeding apace, many contractors will benefit from fewer interruptions going forward and the restart of many postponed projects.”
ABC’s member survey was conducted from Jan. 20 to Feb. 2.
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