Construction backlog dips

The Associated Builders and Contractors (ABC) reported recently that its Construction Backlog Indicator (CBI) sharply declined by 9% between November 2009 and January 2010. The CBI has slipped 16.3% during the last year and currently stands at 5.5 months, the lowest point reported in the 15 months ABC has gathered data.

The CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.

"The fact that the CBI is now at its lowest point since ABC began measuring the statistic in November 2008 indicates that the nation’s nonresidential construction industry remains mired in its own recession," ABC Chief Economist Anirban Basu said in a statement.

Basu said nonresidential construction tends to lag the overall economy by 12 to 24 months.

REPORT HIGHLIGHTS
• Between January 2009 and January 2010, average backlog was down in each of the geographic regions, except for the Middle States. The sharpest regional decline occurred in the South, falling from 8.12 months in January 2009 to 6.03 months in January 2010.

• The average backlog fell in all three industry segments — commercial, industrial and infrastructure — between January 2009 and January 2010. At 5.3 months, backlog in the commercial and institutional category now stands at its lowest level in the survey’s history.

• "The data indicate that infrastructure-related work, attributable to the stimulus package passed in February 2009, is no longer generating substantial new backlog now that the funds have largely been obligated to current projects under way. The elevated backlog readings of previous months are associated with substantial levels of ongoing construction, but the decline in backlog signals an eventual downturn in infrastructure-related construction spending."

• Average backlog is now at its lowest level in both the $50 million to $75 million and the $75 million to $100 million categories. Many of these firms appear to be general contractors that continue to be underbid by larger firms with greater resources and greater capacity to undertake projects with little or no profit margin built into their bids.

• Larger firms also may be more likely to maintain productive banking relationships, allowing them to more nimbly access available contractual opportunities.