Rate cut boosts optimism despite construction backlog dip


Dive Brief:

  • Construction backlog declined to 8.4 months in October, down from September’s slight rebound, according to a Nov. 12 analysis of recent government data from Associated Builders and Contractors.
  • Although backlog dipped, contractor confidence in sales and staffing improved, according to ABC. Profit margins edged slightly lower but remained above the threshold of 50, indicating moderate growth expectations.
  • “Like much of the economy, the construction industry remained in some semblance of a holding pattern in October as project owners continue to wait for election outcomes and for interest rates to decline further,” said Anirban Basu, ABC chief economist. “Despite this wait-and-see attitude, contractors remain upbeat about the next two quarters.”

Dive Insight:

Backlog fell in every region except for the Northeast in October, reversing the previous month’s trend where every region except the Northeast posted an increase, according to ABC.

But the amount of work in builders’ pipeline still remains at a healthy level despite October’s dip, said Basu. He added that the overall construction backlog “has been remarkably stable over the past year,” posting no change compared to October 2023.

The Federal Reserve’s recent 0.25-point rate cut, the second this year, has further bolstered contractor optimism. About 53% of ABC members expect sales to increase over the next months, while just 22% expect them to decline, according to the report.

Larger firms with over $100 million in revenue posted the largest backlog increases, according to the report. Over the past year, these large firms, as well as firms with under $30 million in revenue, managed to post gains to the amount of work in their pipeline.



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