Construction backlog slips as smaller contractors feel the squeeze

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Dive Temporary:

• Construction backlog fell to 8.1 months in November, down 0.3 months from October, in keeping with an Related Builders and Contractors survey carried out Nov. 20 to Dec. 8.
• Backlog declined throughout each contractor measurement besides companies with greater than $100 million in annual revenues, which additionally had been the one group to publish year-over-year and month-over-month good points, in keeping with the report.
• Contractor confidence, however, confirmed combined motion. Expectations for gross sales improved in November, although views on revenue margins and staffing ranges weakened. Nonetheless, all three confidence readings remained above 50, indicating development expectations over the subsequent six months, in keeping with ABC.

Dive Perception:

The November knowledge underscores a widening hole between massive contractors tied to megaproject work and smaller companies uncovered to softer segments of the construction market.

Backlog now sits at its lowest degree since February 2024, a drop pushed primarily by smaller contractors, stated Anirban Basu, ABC chief economist. For instance, companies with lower than $30 million in annual revenues posted their weakest backlog readings in additional than 4 years, in keeping with the discharge.

That’s largely as a result of a lack of data center work. Fewer than 6% of ABC members within the smallest income tier report holding knowledge middle contracts, in contrast with 37% of contractors with greater than $100 million in annual gross sales, stated Basu.

That imbalance has helped insulate bigger companies from the broader backlog slide, in keeping with the discharge.

“Regardless of the decline in backlog, contractors stay broadly optimistic that their gross sales and staffing ranges will broaden over the subsequent six months,” stated Basu within the launch. “On the identical time, simply 33.6% of contractors anticipate their revenue margins to broaden over the subsequent two quarters, the bottom share in over a 12 months.”

That drop in revenue margin expectations stems primarily from rising material costs, stated Basu. A number of costs for key supplies have began to rise once more after a number of quarters of relative stability, he stated.