ABC: Contractor confidence improves in March

Associated Builders and Contractors (ABC) reported today that its Construction Backlog Indicator increased to 8.2 months in March from 8.1 months in February, according to an ABC member survey conducted from March 20 to April 3. The reading is down 0.5 months from March 2023.

Backlog is down over the past year for every region except the Middle States, which now has the second-largest backlog of any region. The South continues to have the largest backlog despite a large decline over the past year.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels increased in March. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months.

“Given headwinds such as high borrowing costs, emerging supply chain issues, project financing challenges and labor shortages, the persistent optimism among nonresidential construction contractors is astonishing,” ABC Chief Economist Anirban Basu says. “Last month, contractors reported rising backlog and greater conviction regarding likely growth in sales, employment and profit margins.

“While certain readings are below year-ago levels, there was a broad-based improvement in March. For instance, in the category of profit margins, 32 percent of those surveyed in February expected improvement over the next six months. That share rose to nearly 34 percent in March, with only 24 percent hinting at near-term margin compression. That indicates that though costs of delivering construction services continue to rise, contractors collectively enjoy enough pricing power to support stable to rising margins. If interest rates begin to decline during the summer as is widely expected, confidence is likely to climb further.”