The Associated Builders and Contractors (ABC) today reports that its latest Construction Backlog Indicator (CBI) is sliding backward as the nation’s construction contract activity declined 3.3 percent in September to 6.7 months after falling more than 5 percent in August to 6.9 months.
The Constructionn Backlog Indicator is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.
“CBI is now edging back toward levels observed in early 2010 as new government stimulus-financed construction projects are no longer translating into additional backlog – a lack of momentum in three construction segments that is cause for concern,” said ABC Chief Economist Anirban Basu. “However, CBI remains well above its historic low point of 5.5 months recorded in January of this year.
“Construction backlog in the infrastructure-related sector is no longer expanding because fewer new contracts are being put on the table. For many months, the infrastructure category drove increases in backlog, but that is no longer occurring. Backlog in the infrastructure category is now approaching 9 months, down from more than 11 months during the early summer of 2010 while recovery in privately financed activities remains stalled, with the overall effect that backlog is now shrinking in that sector,” Basu said.
“The U.S. economic recovery is now roughly 17 months old and nonresidential construction activities typically lag the overall economy by 12 to 24 months, with the implication that privately financed activities should soon begin to show signs of rebound. However, through September, backlog in categories dominated by private financing has yet to expand on a sustained basis. ABC anticipates improvement in construction backlog in the industrial and commercial/institutional categories as the economy continues to recover. However, backlog may continue to decline in the infrastructure category as stimulus funds are steadily spent down,” said Basu.
The infrastructure sector continues to report the largest average construction backlog at 9 months, though it is now shrinking. Between July and September, backlog in this category declined by more than one month.
The heavy industrial category registered the largest expansion in construction backlog from 4.5 months in September 2009 to 6.5 months in September 2010. Construction backlog in the commercial and institutional sector grew by nearly one month from the same time last year. Read more.