Midwest Construction backlogs declined by 11.7%, from 6.97 months to 6.15 months, in the third quarter of 2013, according to year-over-year data compiled by Arlington, Va.-based Associated Builders and Contractors (ABC). The period also marked the fourth consecutive quarter of declining backlogs for the region, a trend ABC attributes to softening activity in the industrial sector.
Nevertheless, construction momentum is becoming increasingly divergent in U.S. regions, the Midwest included, according to ABC Chief Economist Anirban Basu. “The middle states continue to be associated with the shortest average backlog at 6.15 months, even though construction activity has been robust in North Dakota, Iowa, Wisconsin and Minnesota,” Basu says.
The South and Northeast logged positive growth in the third quarter, with backlogs of 9.79 months and 8.23 months, respectively. Backlogs in the south slid by 17%, from 8.93 months to 7.38 months, due to declining infrastructure investment in the region, according to Basu.
Although the third-quarter Construction Backlog Indicator (CBI) reading rose 2.8% in year-over-year comparisons, it suggests that rapid acceleration in nonresidential construction spending won't occur in the near term.
“The reading suggests much of the growth next year is likely to occur after the first quarter of 2014, and only if a successful resolution to lingering federal budgetary issues emboldens decision-makers,” says Basu. “Even with successful negotiations in Washington, D.C., ABC expects publicly financed segments to continue to be hamstrung by reluctant state and local government budget officials.”
ABC's CBI is measured in months and reflects the amount of commercial and industrial construction work under contract, but not yet completed.