The latest report from the Associated Builders and Contractors says most of the nation should see expansion in the amount of nonresidential construction in 2013. The organization reported its Construction Backlog Indicator rose 3.5 percent in the third quarter of this year.
Anirban Basu, the ABC’s chief economist, says things will continue gradually increasing in early 2013 with a more rapid expansion later in the year as more projects that were postponed in 2012 come online. But not all areas of the country will be in the same boat. The South previously enjoyed higher rates of nonresidential construction but has now had four consecutive quarters of declining backlogs.
“Gradual recovery characterizes the Middle States region, though certain communities such as energy-rich North Dakota, economically vibrant Minnesota and states with rebounding auto manufacturing sectors like Indiana are experiencing faster construction spending growth,” Basu said. “In contrast, construction activity in the South has waned, due in part to significant slowing in industrial production, softness in the economies of Alabama and Mississippi, and low natural gas prices, which has impacted energy-related investment.”
Basu said expansion would be quite robust in the West as that region experiences a strong demand for technology, more consumer spending and a more stable housing market than in recent years. The expected increase in nonresidential construction for 2013 could be dampened if the nation drives off the impending “fiscal cliff,” with infrastructure projects being most affected, Basu said. Different sizes of construction firms will experience different levels of growth.
“Backlog rose for all size categories during the third quarter,” said Basu. “Part of this may be explained by the failure of competitors, which positions survivors to expand market share and backlog.
“In general, larger firms, which tend to have more solid banking and insurance relationships, appear best positioned to gain market share by taking on larger projects,” Basu said. “The fragile nature of smaller firms may help explain why these contractors are alone in terms of experiencing a year-over-year decline in average backlog.”
- Construction backlog rose across all company size categories, with firms reporting annual revenue between $30 million and $50 million registering the largest quarterly gain of 1.8 months.
- CBI data indicate specialty trade contractors with annual revenues in excess of $30 million have experienced the greatest improvement.
- Firms with annual revenues of less than $30 million continue to struggle; this is the only segment with construction backlog below year-ago levels.