Mixed signals: Commercial project volume vs. overall economy

Sources: Associated Builders and Contractors, Washington, D.C.; CP staff

The Associated Builders and Contractors monthly Construction Backlog Indicator (CBI) of nonresidential building activity expanded to 9.5 months in March 2019, up 0.7 months or 8.8 percent from the prior month, when it stood at 8.8 months and hovered its highest level in series history. 

“The U.S. economy has been humming and construction backlog is correspondingly elevated,” says ABC Chief Economist Anirban Basu. “While there was a period of weakness in backlog in January, those dynamics, which may very well be seasonal, are no longer affecting the market. The U.S. economy’s strong first quarter appears to have greenlighted more construction projects, translating into ongoing and meaningful increases in construction backlog.

“As a forward-looking indicator of economic activity, CBI stands in stark contrast to a number of other indicators. Many business surveys suggest eroding confidence across the United States, even before the trade dispute between China and the United States heated up. But nonresidential contractors have demonstrated little—if any—loss in confidence.”

“Nonresidential construction spending activity lags the overall performance of the U.S. economy by 12-18 months,” he adds. “Accordingly, the typical nonresidential contractor has little reason for concern until 2020 … Those looking for employment in construction, especially in the skilled trades, will continue to find considerable demand for their services.”