ABC: Construction Backlog Indicator unchanged in February

The Associated Builders & Contractors’ (ABC) Construction Backlog Indicator remained unchanged at eight months in February, according to an ABC member survey conducted Feb. 21 to March 8.

The reading, an economic indicator that reflects the amount of work that will be performed by commercial and industrial construction contractors in the months ahead, is down 0.2 months from February 2021.

Survey respondents in all four regions ­– Middle States, Northeast, South and West – cited labor and material availability and costs as factors chipping away at their backlog. A few respondents in the Midwest cited winter weather as a frustrating factor, ABC says.

ABC’s Construction Confidence Index readings for sales and staffing increased in February, while the reading for profit margins inched lower. All three indices remain above the threshold of 50, indicating expectations of growth over the next six months.

“The level of demand for construction services is simply staggering,” says Anirban Basu, ABC’s chief economist. “Despite sky-high materials prices, surging compensation costs and attendant impacts on bids, many project owners continue to move forward with projects because they recognize construction costs could rise even further.”

Basu adds that there is significant investment capital flowing through the economy. He says real estate projects often satisfy the need to deploy considerable capital quickly, but only if construction is permitted to move forward.

“Accordingly, despite elevated costs and workforce challenges, construction backlog remains stable,” Basu says. “Backlog would likely be rising rapidly if costs were more stable. Nonetheless, construction confidence indicators continue to improve. Collectively, contractors expect sales and employment to expand over the next six months.”

“What is far more remarkable is the expectation that profit margins will expand, indicating that demand for construction services remains elevated enough to countervail cost increases as we head into the heart of 2022,” he adds.