Settling in at its lowest level of 2019, December's Construction Backlog Indicator, reported by Associated Builders and Contractors, dropped to to 8.4 months in December 2019, a 4.2% decline from November's reading. Reported by Associated Builders and Contractors, the association relates that the decline seems to be due mainly to seasonal factors, which unduly impact smaller contractors.

"Backlog for firms with less than $30 million in annual revenue fell to 7.1 months in January 2019 yet rebounded for the majority of the year above the eight-month threshold," says ABC chief economist Anirban Basu. "While backlog among this group once again declined to 7.1 months in December, there is every reason to believe that it will bounce back over the course of 2020."

 

Three of four regions witnessed setbacks in December, with the Northeast and West both tallying a 1.5-month drop. Backlog in the south actually grew by 1.2 months.

"Even seasonal factors don't seem capable of softening construction activity in the southern United States," Basu states. "It is often said that commercial development follows residential, and this appears to be the case. In an environment characterized by the lowest unemployment rates in 50 years, it is not surprising that expanding businesses are increasingly focused on Southern markets registering significant in-migration."

Of the three industry segments, the infrastructure category took the biggest hit: a 1.2-month contraction.

"Backlog for firms in the infrastructure category has historically been more volatile than for other industry segments," explains Basu. "In general, the outlook for infrastructure outlays remains positive, especially as state and local governments continue to collect plentiful revenues and many states having recently increased their gas tax. Policymakers in Washington continue to float plans to invest in infrastructure, though concrete proposals regarding how they would be funded generally remain elusive."