The Associated Builders and Contractors (ABC) of America reported Tuesday that its latest Construction Backlog Indicator (CBI), a forward-looking indicator that measures the amount of construction work under contract to be completed in the future, is sliding backward as the nation's construction contract activity declined 3.3 percent in September to 6.7 months after falling more than 5 percent in August to 6.9 months.
"CBI is now edging back toward levels observed in early 2010 as new government stimulus-financed construction projects are no longer translating into additional backlog - a lack of momentum in three construction segments that is cause for concern," said ABC Chief Economist Anirban Basu. "However, CBI remains well above its historic low point of 5.5 months recorded in January of this year.
"The US economic recovery is now roughly 17 months old and nonresidential construction activities typically lag the overall economy by 12 to 24 months, with the implication that privately financed activities should soon begin to show signs of rebound. However, through September, backlog in categories dominated by private financing has yet to expand on a sustained basis. ABC anticipates improvement in construction backlog in the industrial and commercial/institutional categories as the economy continues to recover. However, backlog may continue to decline in the infrastructure category as stimulus funds are steadily spent down," said Basu.
Some regional highlights from the ABC's findings include: compared to a year ago, all regions except for the Middle States saw an increase in construction backlog; construction backlog in the Midwest experienced a slight decline from 5.6 months in September 2009 to 5.4 in September of this year; the Northeast saw the largest increase in construction backlog at 1.6 months from the same time last September.
The infrastructure sector continues to report the largest average construction backlog at 9 months, though it is now shrinking. Between July and September, backlog in this category declined by more than one month. The heavy industrial category registered the largest expansion in construction backlog from 4.5 months in September 2009 to 6.5 months in September 2010, while construction backlog in the commercial and institutional sector grew by nearly one month from the same time last year.
"Despite the improvement in year-over-year statistics, the lack of any discernible momentum in backlog across the three construction segments is cause for concern. Steadily, the backlog data reflect the declining impact of construction starts related to the stimulus package passed in early 2009. The lack of momentum in privately financed activities suggests the construction industry may suffer a period of spending decline in 2011 before sustained momentum becomes apparent," Basu said.