Construction

Construction Backlog Inches Up Nationally in December

Building Confidence

Construction may be on the upswing in 2021, according to a report by Associated Builders and Contractors (ABC).

“While many contractors enter 2021 with significant trepidation, the most recent backlog and confidence readings suggest that the onset of vaccinations has generally led to more upbeat assessments regarding nonresidential construction’s future,” said ABC Chief Economist Anirban Basu. “Backlog is down substantially from its year-ago level, and profit margins remain under pressure, yet many contractors expect to enjoy higher sales and to support more staff six months from now.”

The organization’s Construction Backlog Indicator rebounded modestly to 7.3 months in December, an increase of 0.1 months from November’s reading, according to an ABC member survey conducted from Dec. 18 to Jan. 5. The backlog is 1.5 months lower than in December 2019.

“While many contractors enter 2021 with significant trepidation, the most recent backlog and confidence readings suggest that the onset of vaccinations has generally led to more upbeat assessments regarding nonresidential construction’s future. Backlog is down substantially from its year-ago level, and profit margins remain under pressure, yet many contractors expect to enjoy higher sales and to support more staff six months from now.”

ABC’s Construction Confidence Index readings for sales, profit margins, and staffing levels all increased in December. The sales index climbed above the threshold of 50, indicating contractors expect to grow sales over the next six months. The index reading for profit margins remained below that threshold. The staffing level index increased to 56.3 but remains well below its December 2019 reading.

“The baseline expectation is that, by the spring, the U.S. economy will blossom,” Basu said. “With many households sitting on mounds of savings and sustaining pent-up demand for many goods and services, the U.S. economy is set for rapid growth as it reopens more fully during mid- to late 2021. While it will take time for that to fully translate into new construction projects, some that were postponed earlier during the pandemic are likely to come back to life over the next several months. That should help many contractors begin to rebuild backlog, and to eagerly await 2022.”

The report comes on the heels of news that the construction industry added 51,000 net new jobs in December, according to ABC analysis of data released by the U.S. Bureau of Labor Statistics. During the last eight months, the industry has added 857,000 jobs, recovering 79.1% of the jobs lost during the earlier stages of the pandemic.

“The expectation remains that, as vaccination proceeds, the U.S. economy is poised for a significant uptick in growth during the latter half of 2021,” Basu said. “That will set the stage for improving industry performance in 2022 and beyond, particularly if the new administration is able to push forward an aggressive infrastructure stimulus package.”

 

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