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Easing inflation, potential price cuts increase backlog

This audio is auto-generated. Please let us know if you have feedback. Dive Brief: Construction backlog moved up to 8.4 months in June, a 1.2% gain from the month prior, according to a Tuesday release from Associated Builders and Contractors.  The small growth in June marks a reversal from a slight 1.2% drop in May

Easing inflation, potential price cuts increase backlog

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Dive Temporary:

  • Construction backlog moved up to 8.4 months in June, a 1.2% acquire from the month prior, in keeping with a Tuesday launch from Related Builders and Contractors. 
  • The small progress in June marks a reversal from a slight 1.2% drop in May. Nevertheless, the general backlog stage stays 0.5 months beneath June 2023, or a couple of 5.6% lower. 
  • “Backlog continues to carry up remarkably effectively regardless of excessive rates of interest, inflation and rising weak spot within the broader economic system,” stated Anirban Basu, ABC chief economist. “Whereas contractor confidence relating to the outlook for gross sales and staffing ranges fell modestly in June, all three Development Confidence Index elements are larger than they had been a 12 months in the past.”

Dive Perception:

The expectation of interest rate cuts by the Federal Reserve later this 12 months attributable to easing inflation and cooling financial progress is a constructive signal for building backlog, stated Basu.

ABC’s Development Confidence Index readings for gross sales and staffing ranges dipped in July, whereas the studying for revenue margins elevated, in keeping with the report. However, all three readings stay above the edge of fifty, indicating expectations of progress over the subsequent six months.

Backlog improved in June for all contractors with annual revenues underneath $100 million, in keeping with the report. However, backlog declined for the most important contractors — these with greater than $100 million in income — in keeping with ABC.

The complete decline in backlog noticed over the previous calendar 12 months is attributable to the center states and Northeast areas. In distinction, the backlog within the South and West areas remained unchanged between June 2023 and June 2024, in keeping with the report.  

“The mixture of slowing inflation and softening progress means that the Federal Reserve could start to decrease rates of interest as quickly as September,” stated Basu. “That may buoy backlog as a few of the softer building segments, like workplace and industrial, profit from decrease borrowing prices and looser lending requirements.”

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