The US Associated Builders and Contractors (ABC) Friday reported that its latest Construction Backlog Indicator (CBI) increased to 7 months in May - reflecting a 27 percent increase from January of this year. The CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.
"Construction backlog continues to edge higher and has generally been on an upward trajectory since late-2009," said ABC Chief Economist Anirban Basu. "But it's not clear whether this level can be sustained.
"While this latest data indicate a broader improvement in nonresidential construction activity, there may be several alarming reasons for the increase including the financial failure of competitor firms leaving more opportunities for surviving companies, or contractors accepting projects with lower profit margins," Basu said.
"Backlog in the infrastructure category remains relatively high and there was improvement over the past two months in the commercial/institutional and heavy industrial categories, as well. However, whether the nonresidential construction rebound will continue to strengthen and broaden for the remainder of 2010 remains to be seen."
Looking regionally, compared to a year ago, all regions but the South experienced a rise in backlog. As of May 2010, the Northeast reports the lengthiest backlog at roughly 7.5 months, the highest level for this region in the history of the survey. The Middle States report the shortest backlog at roughly 6.6 months. However, that represents a significant improvement over the 5.6 months in May 2009.
Industrially, backlog in the commercial and institutional category stood at 7.2 months in April and 6.9 months in May. Backlog related to the heavy industrial category is now at 7.86 months - the highest level in the history of the survey. Infrastructure continues to report the lengthiest backlog an 8.75 months; however, the May backlog reading for this category was at its lowest level in nearly a year.
Concluded Basu, "There will need to be at least several more months of strengthening performance before one can conclude that nonresidential construction is on solid ground."