Associated Builders and Contractors (ABC) reported its Construction Backlog rose to 8.9 months in January 2020, a 5.9% increase from December’s reading. Backlog for firms with less than $30 million in revenue expanded by nearly 20% after declining sharply in December.
“This represents yet another reminder that nonresidential construction and the broader economy entered 2020 with plentiful momentum,” said ABC chief economist Anirban Basu. “Given the current state of financial markets and the possibility that the broader economy is already in recession due to COVID-19, elevated backlog is especially important since it indicates that contractors will remain busy for months to come. For the time being, nonresidential construction will emerge as one of the broader economy’s bulwarks of stability.
“Backlog is especially elevated in the South and the West, which is also where job growth has increased the fastest,” said Basu. “From an industrial perspective, backlog has slumped in the heavy industrial category, and given the impact of the novel coronavirus on the global supply chain, it is likely that contractors operating in the heavy industrial segment will be among the most vulnerable to near-term reductions in their level of activity.
“Generally, nonresidential construction activity lags the broader economy by about 12 to 18 months, so there will come a time when backlog and construction spending will manifest signs of stress,” said Basu. “That said, average backlog currently stands at roughly nine months, implying that many contractors need to prepare for a significantly challenging 2021.”