US backlog higher but ‘instability’ a concern says ABC

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ABC reported a backlog increase of 8.6 months in December 2023, up 0.1 from the month prior.

The reading is down 0.6 months from December 2022.

Regionally, the US South recorded the deepest backlog and had the largest monthly-increase. The US West was the only region to report a decline.

US contractors’ confidence report

The association also released its Construction Confidence Index and found US builders and contractors are feeling better about industry conditions.

“Index readings for sales, profit margins and staffing levels increased in December,” said ABC, adding contractors expected growth over the next six months.

ABC chief economist Anirban Basu added, “Collectively, contractors experienced an uptick in optimism during the holiday season.”

He noted improved credit conditions at the end of 2023 and the possibility of federally reduced rates as reasons for rising confidence.

“That may have rendered project financing a bit easier,” he added. “[Which translates] into both improved backlog and more optimism regarding sales, employment and profit margins for the first half of 2024.”

However, US inflation ticked up last month, and Basu cautioned the probability of interest rate reductions could be lower.

“Recent data indicate that wage pressures persist,” he said, “which makes it more likely that interest rates, and therefore project financing costs, will remain higher for longer.”

‘Geopolitical instability’ affecting US market

Remaining a concern are scattered global conflicts; earlier this month, ABC released a report on US construction input prices, and suggested rising shipping costs in the Red Sea could be problematic.

US contractors, Basu said, will need to monitor how specific conflicts affect the industry.

“Geopolitical instability appears to be on the rise, raising the probability of a major conflagration that could further impact supply chains and potentially cause steep increases in certain energy prices,” he said.