Associated Builders and Contractors Backlog Indicator Held Steady in June, but Contractor Confidence Diminished

The Associated Builders and Contractors (ABC) reported on Tuesday (7-11-23) that its Construction Backlog Indicator—based on the results of a survey of its members conducted between June 20 and July 5—held steady at 8.9 months in June. The reading is also unchanged from June 2022.

ABC reports that for the third consecutive month the backlog in the infrastructure category increased and is now at its highest level in nearly two years. On a regional basis, the South remains the region with the highest backlog, despite being the only region to post a decline in June.

The Construction Confidence Index readings for sales, profit margins, and staffing levels all moved lower in June. Nevertheless, all three readings remain above the threshold of 50, indicating expectations of growth over the next six months.

Providing additional background and his analysis, ABC’s Chief Economist Dr. Anirban Basu said,

“Backlog once again remained stable in June despite tight credit conditions and high interest rates. While those factors drove a decline in all three Construction Confidence Index series, contractors continue to signal an expectation that sales, profit margins, and staffing will expand over the second half of 2023.”

Many aspects of the economy, including consumer spending and the labor market, held up better than expected in the second quarter. That bodes well for economic growth over the summer, but also suggests that the Federal Reserve may raise interest rates higher and keep them there longer in their ongoing effort to suppress inflation. All else equal, that will reduce construction activity in the quarters to come.”