ABC backlog indicator plummets in August

Associated Builders and Contractors (ABC) reported that its Construction Backlog Indicator fell sharply to 7.7 months in August, according to an ABC member survey conducted Aug. 19 to Sep.1. 

The reading is down 0.8 months from July 2021 and down 0.3 months from August 2020.

ABC’s Construction Confidence Index readings for sales, profit margins, and staffing levels all fell modestly in August but remain above the threshold of 50, indicating expectations of growth over the next six months.

“Both contractor backlog and confidence have begun to fade,” said ABC Chief Economist Anirban Basu. “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,” said Basu. “The expected pace of improvement has softened, however.”

Basu notes that 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, according to Basu.