September Construction Backlog Indicator Drops - Modern Distribution Management

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September Construction Backlog Indicator Drops

Despite rising project financing costs, contractors report lofty backlog, rising employment, expanding sales and stable profit margins.
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Associated Builders and Contractors reported Oct. 10 that its Construction Backlog Indicator declined to 9.0 months in September, according to an ABC member survey conducted Sept. 20 to Oct. 4. The reading is equivalent to one year ago, according to ABC.

Despite declining in the prior month, the South continues to have the lengthiest backlog, which has been the case since October 2021. Over the past year, only the West has experienced increasing backlog, survey results show.

ABC said its Construction Confidence Index reading for sales and staffing levels edged higher in September. The profit margins reading fell slightly, and all three readings remain above the threshold of 50, indicating expectations for growth over the next six months.

“Construction continues to defy the downward gravitational pull of tightening credit conditions,” said ABC Chief Economist Anirban Basu. “Despite high and rising project financing costs, ABC contractor members continue to report lofty backlog, rising employment, expanding sales and stable profit margins. That said, industry headwinds grow in force. Interest rates are still edging higher. Political dysfunction in Washington persists. Rising worker compensation costs and lingering supply chain issues are still frustrating industry performance and profitability. The U.S. economy appears poised to slow further. If the past is any indication, that will eventually catch up to construction in the form of dissipating demand. But economists have talked about recession for more than a year, and the industry still shows substantial forward momentum. It remains to be seen whether that momentum can survive the latest set of challenges.”

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