Southern states backlog indicator moves up

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The Associated Builders and Contractors released its Construction Backlog Indicator (CBI) for the first quarter of 2012. the South continues to register the lengthiest backlog at 8.88 monthsBacklog is up by seven-tenths of a month from one year ago.

Nationwide the CBI declined 5.4 percent from the previous quarter, dipping from 7.8 months to 7.4 months, but is slightly higher compared to the first quarter of 2011. CBI is a forward-looking economic indicator that measures the amount of construction work under contract to be completed in the future.

“On the heels of a mixed bag of national economic news, CBI declined for the second quarter in a row,” said ABC Chief Economist Anirban Basu. “The lull in nonresidential construction momentum is not poised to end in the immediate term. The nation’s nonresidential construction activity will remain soft during the summer months, with flat to declining nonresidential construction spending.

“The ongoing instability in the nation’s nonresidential construction industry appears to be related to the period of economic weakness that developed in the broader economy last year, as well as concerns regarding export growth due to recessionary forces in Europe,” Basu said. “The result is that many prospective construction projects were cancelled or postponed.”

Regional Highlights

  • Compared to the first quarter of 2011, construction backlog is slightly higher in every region with the exception of the Northeast.
  • In the West, construction backlog expanded by 0.46 months from the fourth quarter of 2011 to the first quarter of this year.
  • The Middle States have the shortest backlog at 6.34 months and the South continues to register the lengthiest backlog at 8.88 months.

“The South, which includes a number of rapidly expanding, commodity rich states, continues to be the top performer in terms of producing new opportunities for contractors,” said Basu. “Though average construction backlog in the South was roughly flat during the past quarter, backlog is up by seven-tenths of a month from one year ago. No other region has generated an increase in backlog that large. For regional trend data, click here.

Industry Highlights

  • During the first quarter of 2012, average construction backlog for commercial and institutional, and heavy industrial declined by less than half a month. Infrastructure fell by .52 months.
  • The commercial/institutional segment of construction backlog expanded from 7.26 months in the first quarter of 2011 to 7.65 months in the first quarter of this year.
  • Average construction backlog in the heavy industrial category slipped to 5.24 months this quarter – the worst performance in the history of this segment.

Analysis

“Virtually all recent economic data regarding consumer spending, such as retail sales, have increased,” said Basu. “This news likely will translate to continued momentum in commercial construction activity, as reflected in the first quarter CBI. Institutional construction also continues to grow due to the ongoing expansion of the nation’s health care industry.

“In contrast, average construction backlog in the infrastructure category is nearly two months lower than the third quarter of 2009, when a growing number of stimulus-related projects were beginning to move from planning to implementation,” Basu said. “Based on the latest backlog data, infrastructure spending is likely to remain flat for the balance of the year.”  For industry trend data, click here.

“The rebound in commercial construction appears to have positively impacted contractors in the $30 million to $50 million revenue category,” said Basu. “This segment should continue to experience rising construction backlog due to the momentum in this construction industry sector.

“On the other hand, firms with revenues in excess of $50 million have not been able to progress substantially in construction backlog during the past year,” Basu said. “This is primarily due to stagnant backlog in the heavy industry and infrastructure categories, two construction sectors with which many large firms are closely affiliated.”  Read More.

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