ABC: Construction Backlog and Contractor Confidence Waver in October 2022

Associated Builders and Contractors (ABC), a national construction industry trade association representing more than 22,000 members, issued a news release on the latest workforce, policy, and industry issues, as well as construction-related economic data and trends. According to the report, Construction Backlog Indicator declined to 8.8 months in October, according to an ABC member survey conducted from Oct. 20 to Nov. 4. The reading is 0.7 months higher than in October 2021.

The backlog is below the reading recorded in February 2020 after surpassing its pre-pandemic level in September. The commercial and institutional sector's backlog experienced its most considerable monthly reduction since July 2020 and is currently 0.4 months lower than before the outbreak.

According to ABC's Construction Confidence Index, sales were up in October, although staffing and profit margins were down. All three measures are still over the 50-point threshold, indicating that growth is anticipated during the following six months.

ABC Chief Economist Anirban Basu said, “October’s survey data hinted at some emerging weakness in the nation’s non-residential construction sector.” Even though the industry continues to benefit from sizable funding for public work, pandemic-induced behavioral changes, such as remote work and online business meetings, as well as skyrocketing borrowing costs, are leading to noticeable backlog declines in the commercial and institutional segments.

Basu said –“With borrowing costs likely to increase during the coming months and materials prices set to remain elevated, industry momentum could easily downshift further in 2023”. However, it's also possible that some economists are being unduly pessimistic. The U.S. economy still has some underlying strength, and some people don't think a short-term recession is imminent. Data from the contractor survey show that even though the backlog decreased in October, it is still respectable. Additionally, the typical contractor still anticipates that revenues, staffing, and margins will increase over the next six months. If this remaining optimism is justified, only time will tell.