It has been a while since I wrote about contractor backlogs and I picked a lousy month to restart. Backlogs declined across most categories, deeply in some cases. Backlog can be represented two ways. It can be measured in dollars as the amount of future work under contract. Conversely, it can be represented as the duration of time that a contractor will be busy without adding any additional work. In either case, it is a representation of how busy contractors are, and when contractors are busy, it is a sign of a robust market and increased pricing power for contractors. Backlog will be represented below in months, and the overall industry backlog decreased from 9.2 months to 8.7 months. On a quarterly basis, backlog has moved sideways since Q2 2022. Keep in mind that backlogs have been increasing in fits and starts since bottoming out in Q4 2020 due to the COVID-19 pandemic.
Digging into the detailed data shows widespread drops in backlog. As with most economic data, there are some pockets of good news.
First the good news: the South remains a hot region for construction. Also, and I find this very interesting, backlogs increased for all size categories except small contractors (<$30 million in annual volume). Unfortunately, that's where the good news ends. Backlog for smaller contractors was down sharply, and the news was worse in the all regions except the South. The real pain was saved for the heavy industrial and infrastructure categories.
If we zoom out to the year-over-year data, the picture is a bit better, with eight of 12 categories increasing. But the infrastructure numbers are confounding. Given all the government funding being rotated into infrastructure, I would expect backlogs to be growing. However, it may just be a while before we see infrastructure construction to increase as many projects may still be in design. We will just have to see how that category evolves over the next few years.
For more details on how the data has evolved since 2009, keep scrolling.