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Construction

Construction Confidence Up as Backlog Holds Steady

2024-12-12

November witnessed a notable increase in construction industry confidence, as per an Associated Builders and Contractors member survey. This comes while the nation's construction backlog remained virtually unchanged at 8.4 months.

Unveiling the Construction Industry's November Dynamics

Backlog Insights

The backlog reading showed a slight decrease of 0.1 months to 8.4 months across the country compared to November 2023. Infrastructure emerged as the sole category with a higher backlog on a year-over-year basis. In commercial and institutional sectors, the backlog remained at 8.5 months. Additionally, the heavy industrial backlog witnessed an increase from 8.1 months to 8.7 months from October's figures. Construction backlogs are longest in the South, averaging 9.4 months, and shortest in the middle states at 7.7 months. In the Northeast, it stands at 8 months, and in the West, it is 8.6 months.

This detailed analysis of the backlog provides a clear picture of the regional variations and sector-specific trends within the construction industry.

It helps stakeholders understand the current state of the market and make informed decisions based on these figures.

Confidence Trends

ABC's data clearly shows that confidence is on the rise in the construction industry. In November, readings in its Construction Confidence Index for sales, profit margins, and staffing levels all improved. These readings remained above the threshold of 50, indicating expectations for growth over the next six months.

Most members (51.6%) anticipate small increases in sales, with 23% expecting no change. About 10% predicted a significant increase, while 16% expected a decrease. Regarding profit margins, about 60% of members expect an increase, 44% expect no change, and 17% expect a decrease. Half of the members stated that staffing levels will have a small increase, while 35% expect no change.

This data on confidence and its various aspects gives valuable insights into the industry's future prospects and the expectations of its members.

Economist's Perspective

ABC chief economist Anirban Basu noted that "Contractor confidence surged in November even though backlog was unchanged for the month." This sudden improvement in confidence is attributed to increased policy certainty following November's presidential election. Contractors are optimistic about the prospect of falling borrowing costs in the next several quarters.

Despite the contraction in the commercial and institutional and heavy industry categories last month, contractors expect increased activity in privately financed segments during the next six months.

This perspective offers a deeper understanding of the factors influencing the construction industry and the expectations of its key players.

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