Associated Builders and Contractors reported today that its Construction Backlog Indicator increased to 8.6 months in December from 8.5 months in November, according to an ABC member survey conducted Dec. 20 to Jan. 4. The reading is down 0.6 months from December 2022.
The South, which remains the region with the lengthiest backlog, posted the largest monthly increase in December. Only the West, which historically reports the lowest backlog of any region, experienced a monthly decline.
ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels increased in December. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months.
“Collectively, contractors experienced an uptick in optimism during the holiday season,” said ABC Chief Economist Anirban Basu. “Credit conditions eased a bit during the last days of 2023 as the Federal Reserve indicated that its next set of moves will be to reduce borrowing costs. That may have rendered project financing a bit easier, translating into both improved backlog and more optimism regarding sales, employment and profit margins for the for the first half of 2024.
“Still, there remains cause for concern,” said Basu. “Recent data indicate that wage pressures persist, which makes it more likely that interest rates, and therefore project financing costs, will remain higher for longer. Geopolitical instability appears to be on the rise, raising the probability of a major conflagration that could further impact supply chains and potentially cause steep increases in certain energy prices.”