The construction backlog indicator declined to 8.8 months in October from nine months in September, according to a member survey conducted Oct. 20 to Nov. 4 by Associated Builders and Contractors (ABC).

The reading is up 0.7 months from October 2021. After surpassing its pre-pandemic level in September, backlog is now back below the reading observed at the start of the pandemic (8.9 months in February 2020), according to ABC, which also analyzes federal data related to construction.

Backlog in the commercial and institutional segment fell from 9.4 in September to 8.8 in October, its largest monthly decline since July 2020, and is now 0.4 months below pre-pandemic levels, according to ABC.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels all remained above the threshold of 50, indicating expectations for growth over the next six months.

“October’s survey data hinted at some emerging weakness in the nation’s nonresidential construction sector,” ABC Chief Economist Anirban Basu said. “While the industry continues to gain strength from significant funding for public work, pandemic-induced behavioral shifts — including remote work and online business meetings as well as surging borrowing costs — are translating into meaningful declines in backlog in commercial and institutional segments.

“With borrowing costs likely to increase during the coming months and materials prices set to remain elevated, industry momentum could easily downshift further in 2023. But it is also conceivable that certain economists are overly pessimistic. There is still underlying momentum in the U.S. economy, and some believe that near-term recession is not inevitable. Contractor survey data indicate that while backlog declined in October, it remains reasonably healthy. Moreover, the average contractor continues to expect sales, staffing and margins to grow over the next six months. Time will tell whether this lingering optimism is justified.”