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Construction Outlook Begins to Brighten in 2011

Latest News > Industry News

February 15 — A pair of recent reports from building industry groups suggests that non-residential construction may well have turned a corner and is heading up this year.

The most recent Construction Backlog Indicator (CBI), for the fourth quarter of 2010 averaged 7.1 months, up from seven months in the third quarter, a 1.4% increase.

Compiled by the Associated Builders and Contractors (ABC), the CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.

The fourth quarter CBI was up 21.3% from a low of 5.8 months in the last quarter of 2009.

"Today's backlog numbers are consistent with the pace of recovery in overall nonresidential construction activity," said ABC Chief Economist Anirban Basu. "However, what we are seeing from the fourth quarter 2010 data is a recovery in the construction industry that is more gradual than the rate of expansion in financial markets and the broader economy."

Between December 2009 and December 2010, the construction backlog increased in all industry categories except infrastructure, which is a reversal of the usual pattern, said an ABC news release. For much of the history of the CBI, infrastructure-related backlog has been the only source of growth.

During the fourth quarter of 2010, the backlog increased in the commercial and institutional sectors to its high level since late 2008. However, the backlog in the heavy industrial segment has scarcely begun to recover, added ABC. It remains low by historic standards at an average of 6.3 months, in the last quarter.

The most recent semi-annual Consensus Construction Forecast Survey conducted by the American Institute of Architects (AIA) showed similar weak improvement for this year.

"The non-residential construction market is expected to recover this year, but late enough in the year that 2011 spending levels are unlikely to see any growth over 2010 levels," wrote Kermit Baker, AIA chief economist, on the group's website.

The Survey anticipates a 2% decline in construction spending this year that, "will hopefully indicate the bottom of the recession trough and set the stage for a recovery in 2012," Baker wrote. The picture is brighter for 2012, when overall construction is forecast to rise some 5%.

Read the ABC news release.

Read the full AIA report.