Construction backlog declines in July

It may be difficult to secure 2021 work, Associated Builders and Contractors says

Published August 14, 2020 by Sydney Lake

The Associated Builders and Contractors (ABC) national trade association announced Tuesday its Construction Backlog Indicator (CBI) declined to 7.8 months in July, a decrease of 0.3 months from June — which, in turn, has decreased contractor optimism. The CBI is a forward-looking national economic indicator that shows work construction companies are contracted to do in the future, measured in dollars.

“Many contractors are quickly working through existing backlog,” ABC Chief Economist Anirban Basu said in a statement. “Because the virus remains deeply problematic and many communities are rolling back reopening plans, the partial economic rebound observed in May and June is set to flatten. The implication is that while many contractors will continue to work through backlog for the balance of 2020, it may be difficult to secure work for 2021, as fewer projects are bid out and project starts become increasingly rare.”

U.S. construction industry confidence dropped in July in terms of sales, staffing levels and profit margins, according to ABC’s Construction Confidence Index. Sales and profit margin expectations are below the threshold of 50, which indicates ongoing contract expectations. Nearly one-third of contractors expect profit margins to increase during the next six months, but nearly 50 expect shrinking margins.

• The CCI for sales expectations decreased from 51.1 to 47.2 in July. 
• The CCI for profit margin expectations decreased from 47 to 42.7. 
• The CCI for staffing level expectations decreased from 56 to 50.6.

“There are exceptions, of course,” Basu said in a statement. “Backlog in the heavy industrial category has increased and many contractors are reporting more activity in fulfillment and data center construction as the e-commerce boom persists. But with project financing becoming increasingly challenging and with state and local governments in rough fiscal shape, the nonresidential construction environment is not shaping up to be a positive one, absent a meaningful infrastructure package.”

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