Midwest's Construction Backlogs Trail Other Regions
Midwest construction backlogs inched upward in the first quarter, from 5.51 months to 6.16 months, but finished a distant fourth behind those of other U.S. regions, according to data compiled by Washington, D.C.-based Associated Builders and Contractors (ABC).
Among other factors. ABC attributes the lag to “highly constrained public budgets” in major metro markets, including Chicago and Detroit. “When Chicago and Detroit continue to stumble, that limits how much the region can recover,” says ABC Chief Economist Anirban Basu. “Chicago continues to be burdened by high tax rates and underfunded pensions. Though it is attracting capital, Detroit has one of the highest unemployment rates in the nation.”
The South posted the highest backlogs (9.4 months) of all U.S. regions, followed by the Northeast (8.34 months) and the West (8.09 months). However, both the South and Northeast posted declines of 0.13 months and 0.52 months, respectively, for the same period. The West posted a gain of .98 months.
In all, the nation posted a 2.8% decline in backlogs in the first quarter, an occurrence ABC partly attributes to harsh winter weather. The U.S. Construction Backlog Index currently stands at 8.1 months – down from 8.3 months in the previous quarter, but up from 7.9 months in year-over-year comparisons.
By segment, “Only commercial/institutional saw a decrease in backlogs,” says Basu. “Retailers and other commercial [enterprises] have been seeking to build cash reserves rather than expand operational capacity, which helps explain the decline.”
Basu expects commercial backlogs to expand for the balance of the year due to increasing cash reserves and improving confidence among small businesses.