ABC’s construction backlog plunges in November; contractor optimism falters

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Associated Builders and Contractors (ABC) $11,416.71 says that its Construction Backlog Indicator has declined to 7.2 months in November, a decrease of 0.5 months from October’s reading, according to an ABC member survey conducted from Nov. 20 to Dec. 2. Backlog is 1.7 months lower than in November 2019.

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ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels decreased in November. The staffing levels index reading remained above the threshold of 50, indicating expectations of expansion over the next six months. The index reading for sales dipped below 50 in November, while the profit margin index reading remained beneath that threshold, indicating expectations of contraction.

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“When the pandemic first struck down the economic expansion during the February-April timeframe, construction emerged as a relative bulwark of stability,” said Basu. “The sector’s essential industry status in most parts of the country, combined with significant pre-existing backlog, allowed much of industry’s activity to persist even as restaurant, retail, hotel, transportation, tourism and other segments suffered massive setbacks. But the protective shields that helped sustain industry performance have begun to weaken.

“Many projects have been postponed, while others have been cancelled,” said Basu. “New bidding opportunities have become rarer, helping to push backlog lower. The prospect of additional lockdowns hasn’t helped, with many investors remaining too uncertain to bring the next generation of commercial projects to market. Lending conditions have tightened. Many segments have been battered financially, including healthcare, certain manufacturing sectors and lodging. A number of contractors also report project delivery interruptions as workers become infected. That has helped to dampen confidence, with contractors collectively indicating expectations for lower sales and profit margins over the next six months. At the same time, the emergence of vaccine candidates provides light at the end of the tunnel, but 2021 is shaping up to be a challenging year for many contractors.”

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.

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