ABC Unveils Construction Backlog Indicator

ABC released its inaugural Construction Backlog Indicator (CBI), a forward-looking measurement reflecting the amount of work to be performed by contractors in the months ahead.   A high backlog value a large amount of work is due to begin in the near term, leading to a positive economic impact, and a low backlog value indicates fewer projects are under contract, leading to a more uncertain economic impact.  

“Commercial and industrial construction is a major part of the American economy. We have developed this new, innovative measurement not only to track the level of commercial and industrial construction activity, but also to look into the future for signs of recovery,” said ABC Chief Economist Anirban Basu. “Significantly, we are able to track backlog by region as well as by industry sector and company revenue to paint a complete picture of this critical economic segment on an ongoing basis.”    

The overall CBI in the nation's nonresidential construction industry, which includes industrial, infrastructure, and commercial/institutional segments, rebounded in May to 6.3 months, up from 6.2 months in April, but is still down by roughly 0.8 months since November 2008, when ABC began collecting data. During the past seven months, nonresidential backlog is down by an average of 24 days.  

Backlog in May rose in each of the four regions that ABC monitors, with the exception of the South. Despite this drop, at 7.5 months, the South now reports the longest average backlog with the Northeast coming in with the shortest average backlog.   Click here to view a map of the regions.  

“Based on Associated Builders and Contractors" CBI, the most severe retrenchment in business activity in recent months has been along the East Coast and in the South. This comes as little surprise because these areas are home to a significant share of the rapidly declining white-collar sectors, including financial and professional services,” said Basu. “In contrast, the Middle States, which depend more on commodities and energy supply, have been considerably more stable.”  

Average backlog in the infrastructure category rose to 8.6 months in May compared to 6.6 months in April, while the commercial/institutional and heavy industrial segments saw a decline.    

“This jump in contractual activity in the infrastructure segment may be credited to the stimulus package, a potential sign that federal funds are beginning to flow,” said Basu. “This implies that the infrastructure segment is poised to experience a significant increase in value of construction put in place over the next several months.”  

Firms in the $10-million to $30-million earning segment saw an increase in backlog on a monthly basis, but a decrease compared to November 2008, while the $30-million to $50-million segment saw no change in May compared to April, but fell compared to November 2008.   Firms with annual revenues of more than $100 million continue to report the longest backlog at 9.9 months, down from 10.3 months in November 2008.      

“This may be due in part to the participation of these firms in construction segments that continue to expand, including power generation and large-scale infrastructure projects,” Basu noted. Many smaller firms, which are more commercially oriented, are less likely to be direct beneficiaries of the stimulus package, and are experiencing declines in backlog.”  

This new, national economic data set is the only reliable leading economic indicator offering this level of specificity focused on the U.S. commercial and institutional, industrial, and infrastructure construction industries. ABC will compile this data on an ongoing basis, releasing the latest CBI every other month to track industry trends.