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Backlog ticks up, remains historically elevated

Mar 16, 2023 (0) comment , , ,

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New work continues to surge despite a gloomy economic forecast and elevated borrowing costs, according to analysis from Associated Builders and Contractors. Permission granted by Associated Builders and Contractors

 

Brief:

  • Construction backlog increased 0.2 months to 9.2 months in February despite concerns around financing, according to Associated Builders and Contractors.
  • The backlog reading regained its 0.2 month loss from January and has hovered around highs not seen since the start of the pandemic for the past four months, according to the report.
  • “While backlog remains at a historically elevated level, borrowing costs will continue to rise during the next several months, and contractors continue to struggle in the face of skilled labor shortages,” Anirban Basu, ABC chief economist. “If economic momentum fades this year, as a majority of forecasters continue to predict, then backlog and confidence may decline, especially for contractors working predominantly on privately financed projects.”

 

Insight:

Contractor backlog and confidence continue to surge despite a gloomy economic forecast and elevated borrowing costs, said Basu.

Backlog for commercial and institutional projects increased 0.2 months to 9.4 months overall in February. Meanwhile, the backlog for infrastructure projects jumped 1.4 months to 10 months, according to the report.

ABC’s construction confidence index reading for sales, profit margins and staffing levels all increased in February and remain above the threshold of 50. That indicates expectations of growth over the next six months, according to the report.

“This mirrors the broader economy, which has thus far proved resilient in the face of rising interest rates,” said Basu. “While economic strength, particularly regarding labor demand, is surprising, interest rate increases typically take 12 to 18 months to affect the broader economy, and the first interest rate increase occurred in March 2022.”

The Southern region continues to post the highest backlog level of any other region in the U.S. As of February, the South has had at least 11 months of backlog in four of the previous five months, according to the report.

 

 

This article was originally written by Sebastian Obando and appeared here.

 

 

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