ABC: Construction backlogs up, confidence down in March 2022

The Associated Builders & Contractors’ (ABC) Construction Backlog Indicator increased to 8.3 months in March, according to an ABC member survey.

The reading is up 0.5 months from March 2021.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels declined in March. All three indices remain above the threshold of 50, however, indicating expectations of growth over the next six months.

“Demand for construction services remains strong despite sky-high materials prices, skills shortages and elevated bids,” says ABC chief economist Anirban Basu. “ABC contractors indicate that demand will remain strong, with 65 percent of contractors expecting sales to grow over the next six months. Backlog increased in March, indicating that bidding opportunities remain plentiful.

“The recent rise in interest rates could induce certain project owners to move forward with construction work to access affordable investment capital while it remains available,” Basu adds. “It is also conceivable that at some point private demand for construction services will decline as the cost of capital rises.”

Basu says the issue of supply must still be addressed, with more than 3/4 of contractors indicating they recently suffered some setback in delivering construction services. A lack of skilled workers is also contributing to those delays.

“These dynamics will continue to increase the cost of construction delivery during months to come,” he says. “The Russia-Ukraine war has exacerbated inflationary pressures and will likely result in more aggressive monetary tightening by the Federal Reserve. For now, the average contractor expects to be able to pass along a significant fraction of the cost increases to project owners. It remains to be seen whether that will persist as interest rates rise.”