Associated Builders and Contractors reported Dec. 12 that its Construction Backlog Indicator inched up to 8.5 months in November from 8.4 months in October, according to an ABC member survey conducted from Nov. 20 to Dec. 4. The reading is down 0.7 months from November 2022.

Despite the monthly increase, the backlog is currently 0.8 months lower than at July’s cyclical peak. The sharpest declines over that span occurred among contractors with more than $100 million in annual revenues, who collectively reported fewer than 10 months of backlog in November for the first time since the second quarter of 2018.

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

“A growing number of contractors are reporting declines in backlog,” said ABC Chief Economist Anirban Basu. “The interest rate hikes implemented by the Federal Reserve appear to be making more of a mark on the economy. Not only has the cost of capital risen over the past 20+ months, but credit conditions are also tightening, rendering project financing even more challenging.

“The good news is that certain interest rates have begun to fall in anticipation of Federal Reserve rate cuts next year, perhaps as early as the first quarter,” Basu added. “Still, 2024 is poised to be weaker from a construction demand perspective for many firms, especially those that depend heavily on private developers. Those operating in public construction and/or industrial segments should meet with less resistance, on average.”

Visit abc.org/economics for the Construction Backlog Indicator and Construction Confidence Index, plus the Producer Price Index and analysis of spending, employment and job openings.