“For the first time in years, some contractors are reporting that they are turning away work,” said ABC Chief Economist Anirban Basu.
The Associated Builders and Contractors Association (ABC) released its Construction Backlog Indicator (CBI) for March 2016 that reflects national and regional backlog figures for the fourth quarter of 2015.
“The nonresidential construction recovery remains very much in place,” said Basu. “Despite disappointing news regarding global growth and corporate earnings, most contractors reported steady to rising backlog during 2015’s final weeks. That’s important to contractors, of course, but also to other economic stakeholders, since nonresidential construction spending growth has emerged as one of the nation’s leading economic drivers.
“Nonresidential construction spending growth in January of 2016 was fully 12.3 percent its year-ago level,” said Basu. “However, there were a number of months during the latter half of 2015 during which construction spending growth was soft. Accordingly, backlog expanded less rapidly during that period, including during the quarters that precede the fourth quarter’s expansion.”
The southern region in ABC's data analysis showed the greatest increase when compared quarter-to-quarter. Regionally, the South posted backlogs of 11.9 months. Louisiana reported significant surges in backlog, in part due to the petrochemical sector. The western region slowed marginally, as did the Midwest, and the northeast contracted about 2 months worth of backload.
During the third quarter of 2015, backlog expanded in each of the three industry categories monitored by ABC—commercial/institutional, heavy industrial, and infrastructure. Despite the overall growth in backlog, the same cannot be said of the fourth quarter. In fact, one category drove all of the increase in backlog—infrastructure. This is a key finding as many industry participants have wondered how long it would take before the recently passed federal highway bill had an impact. It turns out that impact is already being felt as projects are being bid out in large numbers, allowing infrastructure contractors to add quickly to their respective backlog. Backlog in the infrastructure category reached an all-time high of 12.2 months. During the fourth quarter, backlog in this category increased by 2.3 months, a remarkable result and indicative of the quick impact of the newly passed federal highway spending bill – the first such bill to be passed in many years.
Company Size Trends
Large general contractors with annual revenue of $30-to $50 million, and large subcontractors with annual revenue of $100 million or more seem to be benefiting from the ongoing nonresidential construction market recover. Backlog in the $30-50 million category now exceeds 12 months, the highest level since ABC began collecting backlog data in 2009. Backlog in the $50-100 million category continues to be above 10 months. Companies in the less than $30 million category have held steady at 7.2 months.
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