- Associated Builders and Contractors reported Tuesday that the construction backlog indicator fell to 7.5 months in September, a 0.5 month decrease from August’s level and 1.5 months less than the year before. In addition, the association’s Construction Confidence Index for sales and profit margins also declined.
- The September numbers are down as the backlog, sales, profit margins and workforce expectations increased in August.
- “ABC’s survey data shows that we are in the early stages of a decline in construction costs for non-residential buildings,” said ABC chief economist Anirban Basu. “With a few exceptions, the decline in order backlog has accelerated in all markets and regions.”
In terms of sectors, the backlog decreased the most in the Infrastructure category, but was higher in the Heavy Industry category, a segment that was affected by a combination of a cycle of inventory rebuilding, increasing demand for e-commerce and a restructuring of the Production is returning to the United States, Basu said.
Regionally, the declines have been most pronounced in the west, largely due to the many challenges facing the California economy. Basu said.
In addition, more than a third of contractors expect sales to decline, a dramatic increase from the less than 17% recorded at the same time last year, Basu noted, and more than three quarters of contractors expect profit margins to remain unchanged or worse in the next six months.
That negative sentiment reflects the challenges contractors are currently facing, he said. These include:
- Less bidding options.
- More competition for work.
- Rising material costs.
- Stricter lending standards.
- Weakened foundations for commercial real estate.
- Decreased financial health of the state and municipalities.
- Persistent difficulties in identifying and hiring sufficiently skilled and motivated workers.
Despite the ongoing economic uncertainty amid the ongoing pandemic and upcoming winter, the workforce is expected to grow over the next six months as contractors seek to retain their workforce and potentially expand their talent pool, the economist said.
The ABC results are in line with recent declines in billing for architecture professionals. The newest AIA Billings Index showed that architectural work stalled at 40, indicating a decline in fixed billing. The value has been unchanged for months, which means that the proportion of companies reporting rising bills has not increased during this time.
The AIA data shows business conditions are weakest in the northeast, the region hardest hit by the pandemic and subsequent recession. Settlements continued to decline for companies in the rest of the country too, but AIA says the pace of that decline has slowed from the spring low.