ABC's Construction Backlog Indicator rebounds in 2017

Associated Builders and Contractors (ABC) recently reported that its Construction Backlog Indicator (CBI) rose to 9 months during the first quarter of 2017, up 8.1 percent from the fourth quarter of 2016.  CBI is up by 0.4 months, or 4 percent, on a year-over-year basis.

“This was a terrific report,” said ABC Chief Economist Anirban Basu. “For the first time in the series’ history, every category—firm size, industry and region—registered quarterly growth in CBI. Among the big winners were firms in the western United States and those with annual revenues between $30 million and $50 million per annum"

Highlights by Region

• Surging financial markets helped support activity in financial centers like New York, Philadelphia and Boston. Expanding cyber-security and life sciences activity supported markets as geographically diverse as Washington/Baltimore; Austin, Texas; Silicon Valley, Calif., and Seattle. 
• Though backlog is slightly lower in the South on a year-over-year basis, it continues to report the lengthiest backlog, at 9.8 months. A number of markets remain extraordinarily active with respect to commercial construction, including Atlanta and Miami and Tampa, Fla. Distribution center construction also continues to be active due to a combination of busier seaports and the ongoing online retail boom.
• Backlog in the West was up by a remarkable 26 percent during the quarter.  Part of this was due to statistical payback after a surprisingly weak fourth quarter. However, this is also a reflection of the rapid commercial growth in Seattle, Denver, Silicon Valley, San Diego, Phoenix and other population growth hotspots.
• Higher oil and natural gas prices helped to drive CBI higher in the Middle States. Backlog in the region expanded by a more-than-respectable 10 percent during the first quarter, and now stands at a healthy 8.5 months.  Chicago continues to be a weak spot, however, registering slow job growth relative to other major U.S. metropolitan areas in recent quarters.
• Backlog in the Northeast rose to 8.7 months during the first quarter. Backlog is up by almost precisely half a month over the past year. The New York and Boston metropolitan areas remain particularly active. 

Highlights by Industry

• Backlog in the commercial/institutional segment rose by more than 11 percent during the first quarter, and now stands at nearly 9 months. Backlog also expanded in the heavy industrial and infrastructure categories during the first three months of the year.     
• Average backlog in the heavy industrial category rose to 5.88 months, but remains well below levels registered during much of the history of the series.  Excluding the fourth quarter of 2016, this represents the lowest reading since the fourth quarter of 2014. There are many forces at work, including slowing auto sales, downward pressure on prices in a number of key manufacturing segments and soft exports.
• Backlog in the infrastructure category expanded during the first quarter and remains above historic levels. Actual infrastructure spending has been unimpressive in many categories recently, including wastewater, water supply, dams/levies and highway/street. Available survey data hint at a bit of a pickup in activity during the quarters ahead.
• Commercial/institutional backlog expanded to 8.9 months, matching its highest level since the third quarter of 2014. Though there are growing concerns regarding overbuilding in a number of metropolitan areas, and retail stores continue to close in large numbers, increases in office and hotel construction are helping to propel this category forward.