The average construction backlog dropped to 7.5 months in September, a half-month drop from August’s report, according to the Associated Builders and Contractors (ABC) Construction Backlog Indicator.
The statistics are from ABC’s member survey, which was conducted Sept. 20 to Oct. 6. The 7.5 month backlog is 1.5 months lower than the reading from September 2019, according to ABC.
“ABC’s survey data indicate that we are in the early stages of a nonresidential construction spending downturn,” says Anirban Basu, chief economist at ABC. “With few exceptions, declines in backlog have begun to accelerate across all markets and regions.”
Basu noted that most of this impact has been felt in the West, saying that is largely the result of a number of challenges facing California’s economy.
“Predictably, backlog has also declined rapidly in the commercial/institutional segment,” Basu says. “In addition, backlog has also declined in the infrastructure category, yet was higher in the heavy industrial category, a segment that is coming back due to a combination of an inventory rebuilding cycle, surging e-commerce demand and reshoring of production back to America.
“While nonresidential construction industry sales are anticipated to be flat over the next six months, more than a third of contractors expect their sales to decline – a dramatic increase from the less than 17 percent recorded at the same time last year,” Basu adds. “In addition, more than three-fourths of contractors expect profit margins to be flat or worse over the next six months.”
According to Basu and ABC, the construction industry currently faces a range of issues, including fewer bidding opportunities, rising materials costs, diminished state and local government financial health, and difficulty in finding and hiring skilled labor, among others.
However, even as construction contractors struggle to hire workers, Basu says employment should increase in the months to come.
“Despite ongoing economic uncertainty as the pandemic lingers and winter approaches, staffing levels are expected to grow over the next six months as contractors strive to hold onto their workforce and potentially add to their pool of talent,” Basu says.
Featured photo: Kevin Yanik