Commercial Construction Backlog Indicator tracked by the Associated Builders and Contractors (ABC) has dropped to 7.5 months in September. This is according to the current AIA Billings Index released recently. This represents a 0.5 months decline compared to what was reported in August. The current figure represents a 1.5 months drop on a year-to-year basis.
In terms of the categories, backlog dropped the most in the infrastructure category but was high in the heavy industrial categories. The heavy industrial category has shown a strong come back in recent days thanks to surging e-commerce demand, an inventory rebuilding cycle, and reshoring of production back to the United States.
According to ABC Chief Economist Anirban Basu, the Western region has reported the biggest decline in backlog, a trend that is attributed to California’s struggling economy. He also noted that more than a third of contractors have revised down their sales targets. In addition, more than three-fourth of contractors are projecting a flat or negative profit curve over the next six months.
According to Basu, the negative sentiments are a reflection of the numerous challenges that contractors are currently facing. He noted that contractors are experiencing a drop in bidding opportunities which attract a lot of competition, rising costs of raw materials, and lack or credit due to strict lending protocols. Other challenges include a weak commercial real estate market, lack of state and local government financial support, and difficulty in sourcing the right skills.
As the industry wades through the uncertainties caused by the COVID-19 pandemic, contractors are expected to increase their staffing in the next six months. The findings by ABC echo the results of another study, which reported a drop in billings for architectural professionals. According to the AIA Billings Index, architectural work has stagnated at 40, which shows a drop in billing by firms. The score has stalled for a couple of months, which indicates a drop in the number of firms reporting increases in billings.