ABC: Backlog falls in February, but contractors remain confident

Associated Builders and Contractors (ABC) reported today that its Construction Backlog Indicator declined to 8.1 months in February, according to an ABC member survey conducted from Feb. 20 to March 5. The reading is down 1.1 months from February 2023.

Backlog fell for every contractor size except those with under $30 million in annual revenues in February. Over the past year, however, the largest contractors with greater than $50 million in revenues have experienced the greatest decline in backlog.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels decreased in February. However, all three readings remain above the threshold of 50, indicating expectations for growth over the next six months.

“Backlog is declining and confidence began to fade modestly in February,” ABC Chief Economist Anirban Basu says. “While it is far too early to predict an industrywide downturn given that confidence readings continue to signal growth along sales, employment and profit margin dimensions, it appears that a rising tide of project cancellations and postponements has begun to make its mark.

“With excess inflation remaining stubbornly durable, at least according to certain measures, interest rates are poised to remain higher for longer. That gives higher borrowing costs more time to upset the economic momentum that has so surprised economists over the past two years and has provided support for various nonresidential construction activities.

"With so much federal money still entering the economy, there will continue to be support for growth in certain construction segments, including public works and manufacturing-related megaprojects, but industry weakness is more apparent in segments that rely more purely on private financing.”