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Construction Backlog Posts Monthly Increase

Good News for Nonresidential Construction Industry

Construction Backlog Posts Monthly Increase

In spite of the growth of the overall nonresidential backlog in May, the infrastructure sector declined sharply for the month but ABC chief economist Anirban Basu feels that "is likely a statistical aberration," caused by "changes in the idiosyncratic backlog" by the several very large firms that dominate the sector.

The latest Associated Builders and Contractors' Construction Backlog Indicator grew to 8.9 months, which is a gain of 0.2 months or 2.2% over the previous month when the CBI registered 8.7 months. This all comes after a big drop earlier in the year.

ABC chief economist Anirban Basu notes that this expansion in nonresidential construction spending indicates that it will not only serve as a significant driver of business revenue growth and employment in the industry, but of overall economic strength in in the U.S. as well.

"Despite concerns about the rising costs of material prices and labor impacting construction contracts, demand for nonresidential construction services remains elevated for now," he states.
According to Basu, nonresidential construction spending patterns generally trail the broader economy by 12 to 18 months.
"While nonresidential construction doesn't keep pace with other industry segments during the early stages of an economic recovery, it can continue to see robust growth during the late stages of an economic expansion," he reports. "With the economy continuing to demonstrate momentum along the dimensions of financial market performance, job creation, income growth and consumer spending, contractors can expect several additional quarters of spending growth."

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November 22, 2019, 6:48 am PDT

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