Reflecting Ongoing Supply and Cost Issues, Construction Backlogs See Decline

The Construction Backlog Indicator produced by the Associated Builders and Contractors dropped to 7.7 months in August, charting a decline from both last month and a year ago last August.

That backlog stood at 8.5 months in July and exactly 8 months in August of 2020.

The decline was less severe in the commercial, institutional, and infrastructure sectors, while the heavy industrial sector went from an 8.1-month backlog in July to 5.4 months last month.

The backlog deceased in August in nearly all regions of the country, with the exception of the Midwest, with a 7.1-month backlog in July growing to 7.4 months last month.

The West endured one of the greatest drops: from 9 months in July to 7.4 months in August.

The backlog was lengthier for construction companies with revenues above $100 million, although even this segment witnessed a decline, from 16 months in July to 10.4 in August.

The decline was roughly the same for companies in the $50 million to $100 million category.

Companies with revenues in the $30 million to $50 million range saw a backlog drop from 8.6 months to 7.5 months, while companies listed below the $30 million mark went from a backlog of 7.9 months in July to 7.4 months in August.

At the same time, ABC is reporting that its Construction Confidence Index has seen declines in such areas as sales, profit margins, and staffing.

“Both contractor backlog and confidence have begun to fade,” remarked Anirban Basu, ABC chief economist, in a statement.

Basu noted that “higher materials prices and labor costs have conspired to put more projects on hold. In many instances, expanding costs have rendered projects infeasible.”

For all of that, Basu said contractors generally expect sales and profit margins to increase by the spring of next year.

Basu added that “Recent dips in commodity prices and more normal labor market functioning should help translate into slower cost escalations and rebounding backlog during the months ahead, ultimately reversing the backlog decline sustained in August.”

By Garry Boulard

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