ABC's Construction Backlog Indicator Fell to End 2016
Construction backlog fell by 4 percent during the last quarter
of 2016, according to the latest Construction Backlog Indicator
(CBI) released today by Associated Builders and Contractors (ABC).
Contractors in each segment surveyed-commercial/institutional,
infrastructure and heavy industrial-all saw lower backlog during
the fourth quarter, with firms in the heavy industrial segment
experiencing the largest drop, down 16.8 percent to an average
backlog of 5.5 months.
Overall, backlog-the amount of work
under contract but yet to be performed-fell to 8.3 months duringthe
fourth quarter. CBI rose a modest 0.4 months or 4.5 percent on a
Many factors contributed to the dip in contractors' backlog, but
none is more important than the lack of public construction
spending momentum," said ABC Chief Economist Anirban Basu. "Indeed,
backlog among firms specializing in infrastructure has declined
from 12.2 months during the final three months of 2015 to 10.6
months one year later.
"CBI is intended to be a predictive
tool and has accurately predicted declining public spending for
several quarters," said Basu. "Recent construction spending data
supplied by the U.S. Census Bureau confirm these declines. For
instance, between January 2016 and January 2017, construction
spending in the nation's highway and street segment declined by
more than 10 percent. In the water supply, public safety and
transportation components, the level of construction spending
declined by closer to 11 percent. In the sewage and waste disposal
category, construction spending declined by a whopping 28
"A still fragile global economy,
strong U.S. dollar, and stubbornly low energy prices have helped to
translate into declining heavy industrial backlog," said Basu. "The
only category experiencing construction spending stability is the
commercial segment. Over the past year, construction spending in
office, lodging and relative categories has surged. During that
same period, the CBI reading in the commercial/institutional
category has remained stable."
- Backlog declined in all major
regions of the nation during 2016's final quarter with the
exception of the Northeast. A surge in financial activity and
foreign investment in commercial real estate helped buoy
construction in the New York metropolitan area, according to
available CBI survey data. Boston continues to be propelled by its
large and expanding technology sector. Stable economies in both
Washington and Baltimore have also helped to drive Northeast CBI
- Middle States backlog sits at
roughly 7.8 months. Though this represents a decline on a quarterly
basis, backlog is still more than a month higher than it was a year
ago. Stable-to-rising industrial production in a number of Middle
States communities has helped.
- Backlog in the West declined
during the fourth quarter and is now at its lowest level since the
first quarter of 2015. The region's backlog has now fallen in four
of the previous five quarters, largely due to dynamics among large
construction firms. The technology boom in many communities,
including in Silicon Valley and Seattle, has led to massive
construction projects in recent years. It was expected that this
level of technology-generated construction would slow a bit, and
this appears to be what has transpired.
- Backlog in the South fell during
2016's final quarter, ending a prolonged period of growth that
began during the third quarter of 2015. Despite this setback,
backlog in the southern region remains elevated due to the volume
of construction in several of the region's most economically
dynamic major metropolitan areas, including Dallas, Atlanta,
Orlando and Miami.
- Foreign and domestic equity
capital, searching for a satisfactory combination of safety and
yield, has continued to flow into U.S. commercial real
- Average backlog in the heavy
industrial category fell to 5.5 months during the fourth quarter, a
decrease of more than 1 month. Backlog in the segment has reverted
to early-2014 levels, almost 2 months later than its peak in the
second quarter of 2016.
- Backlog in the infrastructure
category contracted in the fourth quarter but remains well above
its post-recession trough. Despite falling 13.2 percent from the
same time last year, backlog in the sector is up 49.8 percent from
the fourth quarter of 2013.
- Commercial/institutional backlog
fell to end 2016, but the sector remains remarkably stable. The
category's backlog reading has hovered between 8 months and 8.3
months for the past two years.
- Backlog for firms with annual
revenues above $100 million fell dramatically to end 2016 with
contractors shedding nearly three months of backlog on average,
dropping from 13.7 months to 10.8 months. The CBI reading for this
group is now at its lowest level since the second quarter of
- Backlog for the smallest firms
surveyed-those with annual revenues less than $30 million-remains
stable. Many of these companies are subcontractors that continue to
toil on privately-financed, commercial construction
- Firms with annual revenues between
$30 million and $50 million per annum were in the only category
that collectively reported rising backlog. These firms are often
advantageously positioned to take on large components of commercial
or institutional work, and backlog for this group now stands at a
still-healthy 8.3 months.
- Backlog among firms with between
$50 million and $100 million in annual revenue fell fractionally
during the final quarter, not enough for statistical significance.
Though backlog has declined relative to the peak achieved in
mid-2013, in part due to the loss of public infrastructure spending
momentum, average backlog remains above 9 months.