Dive Brief:
- Backlog decreased to 8.2 months in August largely due to the rising cost of financing and project expenses, according to a Sept. 10 release from Associated Builders and Contractors.
- Only the infrastructure category posted a backlog increase in August, an indicator of ongoing public construction spending strength, according to the report. Meanwhile, the commercial and institutional sectors, which are more sensitive to financing conditions, dropped over the past month. All three categories are now lower than a year ago.
- “As predicted, confidence among contractors is slipping,” said Anirban Basu, ABC chief economist. “While ABC contractor members are still anticipating expanding sales and employment, profit margins are increasingly under pressure as project owners face high borrowing and construction delivery costs in the context of a slowing economy.”
Dive Insight:
Despite the relative strength of infrastructure projects, backlog still declined across all major segments over the past year.
Total work in the pipeline now trails last year’s pace by exactly one month. That has led to growing pessimism among contractors, according to the report.
For example, ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels all fell in August. Notably, its readings for profit margins also dipped below the threshold of 50, meaning contractors no longer expect profit margin growth over the next six months.
That squeeze on profits could lead to even more postponements, especially in the South, said Basu. The South region has lost about 2.3 months worth of work over the past 12 months, the largest decrease for any region nationally.
Drops were across the board, with almost all sizes of construction companies reporting declines to their backlog in August, according to ABC. Only firms with annual revenue between $50 million and $100 million managed to grow their backlog over the past month.
