Backlog Indicator Slips; Optimism Still High

Credit: Gowling WLG

By Associated Builders and Contractors

Associated Builders and Contractors reported its Construction Backlog Indicator fell to 7.8 months in March, according to an ABCmember survey conducted from March 22nd to April 5th, a decrease of 0.4 months from both the February 2021 and March 2020 readings.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels increased in March. All three indices remain above the threshold of 50, indicating expectations of growth over the next six months.

“There are two countervailing forces influencing backlog,” said ABC Chief Economist Anirban Basu. “On the one hand, design work on new projects declined during most of the pandemic. Some of this is attributable to the need to socially distance, risk aversion and the jarring effects of the crisis on commercial real estate. The result has been fewer projects presently available for bid, which is consistent with declining backlog.”

“On the other hand, the surprisingly strong economic recovery has brought projects that seemed dead back to life,” said Basu. “The boom in e-commerce and other tech segments has also produced greater levels of demand for construction of fulfillment and data centers. The overall result is that backlog is roughly where it was six months ago. Given that contractors remain confident regarding sales, employment and profit margins over the balance of the year, the expectation is that more projects will enter the design phase, bidding opportunities are set to rise and at some point, backlog will reestablish an upward trajectory.” (Source)

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