The Associated Builders and Contractors (ABC) reports that its Construction Backlog Indicator (CBI) for the fourth quarter of 2010 averaged 7.1 months, up from 7 months in the third quarter of last year – an improvement of 1.4 percent. In addition, CBI is up 21.3 percent from a low of 5.8 months in the fourth quarter of 2009. CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.
“Today’s backlog numbers are consistent with the pace of recovery in overall nonresidential construction activity,” said ABC Chief Economist Anirban Basu. “However, what we are seeing from the fourth quarter 2010 data is a recovery in the construction industry that is more gradual than the rate of expansion in financial markets and the broader economy.
“CBI continues to edge toward levels observed last spring. At that time, federally financed projects were adding to construction backlog as they moved from the planning stage to the bid selection stage,” said Basu. “However, the fourth quarter numbers indicate that federal stimulus is no longer adding to construction backlog in a meaningful way and that the recovery in many privately financed segments remains agonizingly slow. Still, CBI remains well above its historic low point of 5.5 months recorded in January 2010.
“During the fourth quarter of last year, sources of economic improvement and growth expanded to include additional retail segments, rapid export growth and an uptick in business investment,” Basu said. “At the same time, improvement in commercial and institutional construction became more apparent as backlog in these two sectors rose to the highest level in the history of the series,” Basu said.
“The improvement in commercial construction-related backlog is precisely what ABC forecasted in its last report, and we anticipate that this segment will continue to show signs of life and growth in the months ahead,” said Basu.
During the past year, construction backlog expanded in all major regions of the country except the West, which posted the smallest average backlog at 5.8 months in the fourth quarter of 2010. The South, which includes North Carolina continues to support the largest average construction backlog. In the fourth quarter of 2010, regional backlog averaged 7.8 months, and it is expanding briskly.
“The fourth quarter 2010 data shows that the economy is increasingly shifting toward private sector momentum and away from public sector dependence. Though the recovery remains well short of two years in duration, its positive impact on construction is becoming increasingly apparent,” Basu said. “Unfortunately, the outlook is not as bright for contractors that primarily work in the infrastructure segment. As federal stimulus-financed projects wind toward their inevitable conclusion, the expectation is that construction backlog in this category is likely to fall, bolstered by ongoing issues in state and local government finances, which hamstring capital spending.”
To read more about the ABC Construction Backlog Indicator click here.