Backlog Increases Amid Easing Credit Conditions
Date Posted: January 18, 2024
Posted In: News,
From Construction Dive: Construction backlog ticked up in December to 8.6 months due to improving financing availability, according to a Tuesday release from Associated Builders and Contractors.
The metric is still rebounding from a backlog level of 8.4 months in October, its lowest point since the first quarter of 2022, according to ABC. The December increase, however, has sparked some confidence among contractors, due to two consecutive months now of backlog growth.
“Collectively, contractors experienced an uptick in optimism during the holiday season,” said Anirban Basu, ABC chief economist, in the report. “Credit conditions eased a bit during the last days of 2023 as the Federal Reserve indicated that its next set of moves will be to reduce borrowing costs.”
Dive Insight
The Federal Reserve will likely trim the federal funds rate by the end of 2024, according to Fed officials. That anticipated easing of credit conditions resulted in both an improved backlog and more optimism in ABC’s Construction Confidence Index for the first half of 2024.
All three components of the index, which consists of sales, employment and profit margins, increased in December. Additionally, all three readings remain above the threshold of 50, indicating expectations for growth over the next six months, according to the report.
But causes for concern persist, especially since the Fed noted inflation still remained elevated during its last meeting in December. That could cause rates to remain up in the interim, said Basu.