ABC’s construction backlog indicator surges in March

Real Estate | 21 May |

Associated Builders and Contractors reports that its monthly Construction Backlog Indicator expanded to 9.5 months in March 2019, up 0.7 months or 8.8% since February 2019 when CBI stood at 8.8 months.

“The U.S. economy has been humming and construction backlog is correspondingly elevated,” said ABC Chief Economist Anirban Basu. “While there was a period of weakness in backlog in January, those dynamics, which may very well be seasonal, are no longer affecting the market. The U.S. economy’s strong first quarter appears to have greenlighted more construction projects, translating into ongoing and meaningful increases in construction backlog.

“As a forward-looking indicator of economic activity, CBI stands in stark contrast to a number of other indicators,” said Basu. “Many business surveys suggest eroding confidence across the United States, even before the trade dispute between China and the United States heated up in recent weeks. But nonresidential contractors have demonstrated little—if any—loss in confidence, with ABC’s February Construction Confidence Indicator remaining robust. The most glaring exception is industrial contracting, for which CBI declined sharply in March. 

“The general optimism of nonresidential construction firms may have something to do with the timing of construction cycles,” said Basu. “Nonresidential construction spending activity lags the overall performance of the U.S. economy by 12-18 months. Accordingly, the typical nonresidential contractor has little reason for concern until 2020. Other businesses, including retailers, are more likely to be immediately impacted by macroeconomic performance.

“In any case, nonresidential construction backlog has seldom been higher in the history of the series,” said Basu. “The implication is that those looking for employment in construction, especially in the skilled trades, will continue to find considerable demand for their services.”

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