The Construction Backlog Indicator increased 3.5% from the previous quarter, which indicates that construction spending will continue to surge through 2013, reported the Associated Builders and Contractors.
The CBI reflects the amount of work under contract, but that is not complete and is measured in months.
The reason why construction recovery is at a slower pace than anticipated is because of the uncertainty and fear of the economy, specifically the fiscal cliff, the report states.
“While the nation’s nonresidential construction activity is likely to remain subdued as we approach the final months of 2012, the CBI is signaling that nonresidential construction spending will accelerate by mid-2013,” said chief economist Anirban Basu of ABC. “However, this presumes the nation does not tumble over the fiscal cliff — a series of spending cuts and tax increases that kick in at the end of the year.
He added that another recession would undermine the momentum of an already struggling construction industry.
The regions of Northeast, Middle and Western states posted a year-over-year growth in backlog and an expansion in construction backlog during Q3.
The West is predicted to continue to experience a rapid construction recovery since these states have made strong progress throughout the previous three quarters. This is due to rising levels of consumer spending, a stable housing market and a demand for technology.
In the industry, the backlog in the commercial and institutional category rose for the second month in a row as a result of consumer spending and renewed expansion plans by retailers.
“The presumption is that progress will continue to be gradual during the initial quarters of 2013, but there is a possibility many projects postponed in 2012 due to elevated levels of uncertainty will come back online next year, spurring more rapid overall nonresidential construction recovery during the second half of 2013,” Basu said.
