A leading indicator of construction activity in the United States continues to rise, but the overall outlook remains less promising.
Associated Builders and Contractors reported that its Construction Backlog Indicator (CBI) increased 10 percent in the second quarter to an average of 8.1 months. That’s up from 7.3 months the previous quarter. The CBI is 12 percent higher than a year ago.
The western region experienced a modest construction backlog increase of .61 months from a year ago.
The CBI measures the amount of construction work under contract to be completed in the future.
“While the increase in construction backlog appears to be good news at first glance, taking a broader look reveals that the rise in the nation’s construction activity may be a reflection of the economic momentum that existed several months ago, but is now beginning to weaken,” said Anirban Basu, chief economist for the ABC, a construction trade group.
“The nation’s economic recovery has remained fragile since June 2009 and any observed recovery in construction volumes has been tentative,” Basu said. “The events of the last few weeks have had a negative impact on both the overall economy and the nation’s construction sector, with business leaders generally seeking to reduce exposure to risk and investment volatility.
“More specifically, the U.S. economy continues to be pummeled with a sea of constraining factors ranging from rising gas and food prices, to Washington’s stalemate on lowering the nation’s deficit, the downgrade of the U.S. credit rating, Europe’s growing financial crisis and the U.S. financial market turmoil,” Basu added.
“None of this is good news for construction contractors or others hoping for a far ranging, more aggressive economic rebound. Though average construction backlog has been on the ascent in recent months, future surveys are likely to reflect a reversal of the trend and may lead to a chill in the nation’s building recovery,” he said.
The south continued to report the lengthiest construction backlog of any major region, with project orders rising 1.87 months during the second quarter compared to one year ago.
The construction backlog in the middle states continued to expand, growing by .25 months, or an 11.8 percent increase from the second quarter of 2010.
The northeast reported the smallest construction backlog increase of .04 months from the same period last year.