Midwest Backlogs Drop for Third Consecutive Quarter
Construction backlogs in the Midwest declined by 6%, from 6.73 months to 6.32 months, in the second quarter of 2013, according to year-over-year data compiled by Arlington, Va.-based Associated Builders and Contractors (ABC). The period also marked the third consecutive quarter of declining backlogs for the region, a trend ABC attributes to slow economic growth in Illinois and Wisconsin.
“Many state governments in the region are facing particularly large fiscal challenges, says ABC Chief Economist Anirban Basu. “That said, there will be times when the Middle States become more active than [other regions] as energy production expands in the Utica Shale region.”
All other regions showed positive growth in the second quarter. The Northeast led with backlogs of 9.41 months, followed by the South with 9.05 months and West with 8.21 months.
Perhaps the biggest surprise is that backlogs in the South have not increased more aggressively,” says Basu. “Most macroeconomic data indicate the South and the West are the fastest-expanding regions in the nation.”
Basu characterizes recovery in the non-residential sector as “sporadic and highly constrained,” but says several developments denote improvement in the nation's economy. “The pace of job creation has accelerated in recent months, U.S. financial markets have generated lofty returns, and both anecdotal and quantitative data indicate project financing has become somewhat easier to obtain,” he says.
“This doesn't suggest that recovery of the nation’s construction industry has suddenly become assured,” says Basu “The U.S. economy is on pace to expand less than 2 percent this year, which is still insufficient to foment the type of aggressive, broad-based non-nresidential construction cycle for which many contractors have been waiting.
“Through the first half of this year, U.S. nonresidential construction spending was roughly flat,” says Basu. “Performance should improve during the latter half of the year, but the CBI seems to be indicating that revenue opportunities are set to expand more forcefully in 2014.”
ABC's Construction Backlog Index is measured in months and reflects the amount of commercial and industrial construction work under contract, but not yet completed.