Dive Brief:
- Construction backlog inched lower to 8.3 months in May, about a 1.2% drop from the month prior, according to a Tuesday release from the Associated Builders and Contractors.
- The tick down in May ends a two-month streak of backlog growth. The overall backlog level remains 0.6 months below May 2023, or about a 6.7% drop. As high interest rates linger, contractors’ optimism about the future remains guarded, according to ABC.
- “Although backlog has been lower in 2024 than it was during 2023, it has also been stable,” said Anirban Basu, ABC chief economist. “While significant spending activity in manufacturing and infrastructure-related segments has kept contractors busy, input cost escalation has reemerged in recent months. As a result, contractor confidence regarding profit margins has fallen to the lowest level since November 2023.”
Dive Insight:
ABC’s Construction Confidence Index readings for profit margins and staffing levels fell slightly in May, while the reading for sales improved. Nevertheless, all three readings still remain above the threshold of 50, indicating expectations for growth over the next six months, according to ABC.
There was a silver lining in the report. Backlog increased for contractors with annual revenues over $100 million even as it fell for all other contractors. Still, over the past 12 months, backlog has declined for all contractors, regardless of size, according to the report.
“Over a year has passed since the Federal Reserve raised the target range of the federal funds rate above 5%,” said Basu. “Despite widespread expectations that rates will remain elevated through at least the end of the year, contractors remain confident about the future, with a majority of contractors expecting their sales and staffing levels to expand over the next six months.”