According to results of the Associated Builders and Contractors' (ABC) Construction Backlog Indicator released Tuesday morning, the national average construction backlog was 8.63 months in the first quarter of 2016, a 2.62% increase year-over-year from Q12015's average of 8.41 months, and 0.8 drop compared to the fourth quarter of 2015. The Construction Backlog Indicator is forward-looking national economic indicator reflecting the amount of work that will be performed by commercial and industrial contractors in the months ahead, and the Q12016 reading indicates a stabilizing market. While the market still bears a shortage of skilled workers in general, ABC reports that it is becoming easier for the biggest firms to quickly recruit talents.
“Contractors are no longer becoming busier, rather, the level of activity has stabilized at a reasonably high level,” ABC Chief Economist Anirban Basu said in a statement. “Most contractors continue to express satisfaction regarding the amount of work they have under contract. This is of course truer in certain parts of the nation than others.”
Year-over-year, the backlog of work in the West region increased more than any other region (increasing 1.4 months) to a mark of 6.94 months, followed by the Middle States (up 0.58 months), and the South (0.27 months). The Northeast is the only region that reported a year-over-year decline of 0.95 months, with a backlog of 8.2 months. By volume, the South has the highest average backlog of any other region, with a reading of 10.11 months in the first quarter. According to the release, "contractors in the South have reported average backlog in excess of 10 months for three consecutive quarters, [which] is unprecedented in the history of the series."
Backlog in the commercial/institutional industry changed minimally in the past year, ending this quarter with an average backlog of 8.07 months, a modest decline from the 8.19 months reported in the fourth quarter of 2015. The first quarter reading indicates that contractors in the commercial/institutional industry will remain busy while contractual activities continue to stabilize. During the same period, construction backlog in the heavy industrial industry averaged 6.86 months (on par with the reading from Q12014), while backlog in the infrastructure industry increased 12.66%, from 9.95 months in Q12015, to 11.21 months in the first quarter of this year.
Nevertheless, ABC warns that contractors working in the commercial real estate segment should be wary in the coming months, as the development cycle is nearing its end. “Developers, bankers ,and regulators have become generally more concerned by the possibility of overbuilding hotel, office and retail markets. Many developers indicate that the current cycle is much closer to its end than to its beginning. The implication is that for the first time in years, backlog may be poised to decline after recovering massively since early 2010,” Basu commented.
Read the full release here >>