Construction Backlog Indicator Down In March 2023
Associated Builders and Contractors reported on April 11, 2023, that its Construction Backlog Indicator(CBI) declined to 8.7 months in March, according to an ABC member survey conducted from March 20 to April 3. The reading is 0.4 months higher than in March 2022.
What is the CBI and how does it work?
The Associated Builders and Contractors (ABC) has built strong relationships with its members to formulate a forward-looking metric for the Construction Industry. This metric is the Construction Backlog Indicator (CBI). Information is gathered by utilizing confidential surveys, distributed to active members, in the areas pictured below.
The surveyed participants provide monthly information regarding their estimated annual company revenue performed in three specific categories:
Commercial and Institutional – construction related to office space, retail, malls, restaurants, hotels/convention centers, arenas, stadiums, construction related to hospitals, nursing homes, assisted living centers, K–12 schools, colleges/universities, military bases, and government research centers;
Infrastructure – construction related to the supply of water, wastewater disposition, power generation/distribution, roads/highways/bridges, and telecommunications infrastructure; and
Industrial – construction related to manufacturing facilities, refineries, distribution centers, warehouse space, and flex space.
Once the revenues have been collected, the ABC then categorizes the revenues as seen below:
Less than $30 million;
$30 million-$50 million;
$50 million-$75 million;
$75 million-$100 million;
More than $100 million.
What is the Formula?
The numbers are then provided by using this formula:
Current month’s level of backlogs (reported in dollars) ÷ Fiscal year revenues (base year)× 12 = total months of forward-looking work under contract
What does this really mean?
This report doesn’t mean you should sell your business or retire early, unless, of course, you’re ready for bottomless margaritas and tan lines! Assuming you’re not quite ready, let’s review what all this means. These charts reflect that even though staffing levels and profit margins fell, sales readings increased in March! This hints at expectations of growth over the next 6 months. However, keep in mind that the turmoil with SVB Bank has projections of financial tightening. This forecasted strain could impact growth over the months to come.