Construction Indicators ‘Fading’: ABC

The Associated Builders and Contractors (ABC) said two of its indicators are “fading.” The Construction Backlog Indicator fell to 7.7 months in August, and the Construction Confidence Index dropped in August.

“Both contractor backlog and confidence have begun to fade,” said ABC chief economist Anirban Basu in a prepared statement. “Higher materials prices and labor costs have conspired to put more projects on hold. In many instances, expanding costs have rendered projects infeasible.

“That said, it is still the case that contractors collectively anticipate sales, staffing levels and margins to rise over the next six months,” he said . “The expected pace of improvement has softened, however. With so much liquidity continuing to be injected into financial systems, investors have considerable sums to deploy in new investments. Real estate valuations and construction volumes benefit from such dynamics. Recent dips in commodity prices and more normal labor market functioning should help translate into slower cost escalations and rebounding backlog during the months ahead, ultimately reversing the backlog decline sustained in August.”

The backlog indicator of 7.7 months is down 0.8 months from July, and down 0.3 months from August 2020.

The confidence index pertains to sales, profit margins, and staffing levels. Although it fell in August, it remains above the threshold of 50, indicating expectations of growth over the next six months.

Source: ABC