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ABC: Construction backlog indicator inched higher in June, Alabama contractors remain confident

Associated Builders and Contractors reported today that its Construction Backlog Indicator increased to 8.4 months in June, according to an ABC member survey conducted June 20 to July 3. The reading is down 0.5 months from June 2023.

A construction backlog indicator measures the amount of work that construction companies already have lined up but haven’t started yet, expressed in months.

The entire decline in backlog observed over the past calendar year is attributable to the Middle States and Northeast, ABC reports. Backlog in the South and West regions was unchanged between June 2023 and June 2024.

ABC’s Construction Confidence Index, a measure of how optimistic or pessimistic construction industry professionals feel about the future, reported sales and staffing levels fell slightly in June — while the reading for profit margins improved. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months.

A construction confidence index is a measure of how optimistic or pessimistic construction industry professionals feel about the future. It looks at three main areas: expected sales, staffing levels, and profit margins.

“Backlog continues to hold up remarkably well despite high interest rates, inflation and emerging weakness in the broader economy,” said ABC Chief Economist Anirban Basu.

“While contractor confidence regarding the outlook for sales and staffing levels fell modestly in June, all three Construction Confidence Index components are higher than they were one year ago.

“While the overall Backlog Indicator shows a small decline from 2023, the South — including Alabama — continues to see positive backlog and construction confidence. One cannot help but point to our right to work laws and pro merit shop way of doing business as the reason the South remains strong,” added Jay Reed, President of ABC of AL.

“The combination of slowing inflation and softening growth suggests that the Federal Reserve may begin to lower interest rates as soon as September,” said Basu. “That will buoy backlog as some of the softer construction segments, like office and commercial, benefit from lower borrowing costs and looser lending standards.”

A spreadsheet of the Construction Confidence Index data series provided by the ABC is also available.

Grayson Everett is the state and political editor for Yellowhammer News. You can follow him on Twitter @Grayson270

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