ABC’s Construction Backlog Indicator, Contractor Confidence Index Rise in June

Associated Builders and Contractors reports that its Construction Backlog Indicator rose to 8.5 months in June, according to an ABC member survey conducted June 20-July 6, 0.5 months higher than in May 2021 and 0.4 months higher than in June 2020.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels increased modestly in June. All three indices remain above the threshold of 50, indicating expectations of growth over the next six months.

“Nonresidential contractors continue to predict a strong rebound in activity over the balance of the year,” said ABC Chief Economist Anirban Basu. “Despite recent weakness in industry employment and spending data, contractors collectively remain upbeat. The neck-snapping pace of economic recovery, along with low financing costs and the return of projects that had been placed on the back burner during the pandemic, is translating into rising backlog and optimistic perspectives on employment, sales and profit margins.

“Rapidly rising materials prices was one of the leading threats to a vigorous nonresidential construction recovery; however, that factor has become a bit less concerning in recent weeks,” said Basu. “Still, materials prices are likely to remain meaningfully above pre-pandemic levels. Moreover, the shortage of skilled workers continues to worsen, driving up wages and project bids in the process. Demand for construction services is expected to be strong enough during the months ahead to allow contractors to pass many of these higher costs onto the purchasers of construction services, preserving margins in the process.”

Note: The reference months for the Construction Backlog Indicator and Construction Confidence Index data series were revised on May 12, 2020 to better reflect the survey period. CBI quantifies the previous month’s work under contract based on the latest financials available, while CCI measures contractors’ outlook for the next six months.