Backlog slips as small construction firms lose ground

Dive Brief:

• Construction backlog fell to 8.5 months in August, down from 8.8 months in July, according to an Associated Builders and Contractors survey conducted Aug. 20 to Sept. 3.
• Contractors with under $30 million in annual revenue accounted entirely for the monthly decline, according to the data. Larger firms, on the other hand, posted the longest backlog in over two years.
• Overall contractor confidence around sales hovered around the same level in August, with profit expectations improving and staffing outlook dipping, according to the report.

Dive Insight:

The August decline in backlog shows the growing divide between smaller and larger firms. 

Larger firms, those with more than $100 million in annual revenues, continue to expand pipelines. That runs contrary to smaller firms, or those with under $30 million in annual revenue, which still remain under strain.

“The dip in backlog observed in August is not surprising given ongoing declines in nonresidential construction spending,” said Anirban Basu, ABC chief economist. “While backlog in the heavy industry and infrastructure categories held up well, commercial and institutional backlog has not.”

Backlog for infrastructure-related projects jumped 1.6 months in August to a total of 11.2 months, according to the report. Commercial and institutional backlog, meanwhile, lost close to a month worth of work, and now sits at 8.3 months.

Basu tied that weakness in private construction, such as commercial work, to “rising material costs, policy uncertainty and reemerging labor shortages.” He added the category will likely remain weak over the next few quarters.

At the same time, tariffs still contribute to project disruptions across the board. About one in four contractors reporting having a project delayed or canceled due to tariffs, said Basu.

“While that is relatively stable from July, a similar share reported project delays or cancellations due to lack of funding and labor force issues,” said Basu. “While contactor confidence was stable for the month, it will be interesting to see how long this optimism persists if the myriad headwinds facing the industry remain in place.”