Dive Transient:
- Development backlog edged down to eight.3 months in December, a slight lower from November, in line with an Related Builders and Contractors survey carried out from Dec. 20 to Jan. 6.
- Business and institutional backlog declined practically a full month over the previous yr, reaching its lowest degree since February 2023. These classes, which embrace tasks similar to retail, workplace, hospital and training, distinction with infrastructure backlog, which hit its highest level since August 2023.
- ABC’s Development Confidence Index continues to indicate progress expectations for gross sales and staffing, although revenue margins slipped barely, in line with the report.
Dive Perception:
The slight decline in backlog underscores lingering challenges for contractors, significantly within the industrial and institutional sectors, the place backlog hit its lowest level in practically two years.
However contractor confidence paints a extra optimistic image. Builders’ expectations for gross sales progress at the moment are at their highest degree since early 2022. The sentiment displays contractors’ perception in a near-term pickup in exercise, significantly within the first half of 2025.
Nonetheless, ABC’s chief economist additionally cautioned that momentum may very well be brief lived, ought to rates of interest stay elevated.
“If charges stay greater for longer, backlog might stay subdued, particularly within the struggling industrial and institutional class,” mentioned Anirban Basu, ABC chief economist.
The Federal Reserve seems unlikely to proceed aggressive price cuts in 2025, in line with its most up-to-date assembly in December. That doesn’t bode properly for the backlog total, mentioned Basu.
“Whereas backlog inched decrease in December, contractors broadly anticipate building exercise to select up within the first half of this yr,” mentioned Basu. “Regardless of that confidence, the trail of rates of interest will play a essential position in business efficiency in 2025.”
