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Construction Backlog Moves Backward
Retreat Follows Two Months of Gains

Construction Backlog Moves Backward

In spite of an overall decrease in the construction backlog, the heavy industrial and infrastructure categories showed an increase in the most recent report thanks in part to gains in the highway/street, transportation and water supply subcategories.

The latest Associated Builders and Contractors' Construction Backlog Indicator was down 9% month-over-month - coming in at 8.7 months compared to 9.5 months at last count. The index is an economic indicator "that reflects the amount of work that will be performed by commercial and industrial construction contractors in the months ahead," according to the association.

"Given the ongoing expressions of confidence regarding near-term prospects in the U.S. nonresidential construction industry, the reduction in backlog shouldn't be cause for alarm, especially with construction backlog significantly higher than at the onset of 2019," said ABC chief economist Anirban Basu.

He blamed the recent drop on the commercial/institutional category.

"This can be attributed to construction spending trends, which show that growth in certain commercial segments is not nearly as robust as in prior years," stated Basu. "There are many potential explanations, including evidence suggesting that some banks have become increasingly wary of lending for commercial construction projects after years of rapid building and concerns regarding economic slowing."

But not all the news was bad.

"Infrastructure spending in the United States is red hot right now," he remarked. "With the U.S. economy on the verge of 10 years of economic expansion, many state and local government finances are at their healthiest level in more than a decade, resulting in more funding available for infrastructure projects. There has also been a considerable appetite for the bonds often floated by governments to finance such projects."

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August 19, 2019, 4:44 pm PDT

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