Alabama Construction News

OCT-DEC 2018

Alabama Construction News is the states only bimonthly magazine dedicated to the commercial construction industry.

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Page 19 of 67

18 AL CONSTRUCTION NEWS OCT-DEC 2018 this segment is up more than 20 percent from the second quarter of 2017. This is remarkable given expectations prevailing a year ago. Back then, many worried that a number of commercial segments had become overbuilt, at least in certain geographies. This suggested that backlog was vulnerable, with fewer new projects moving from the drawing board to construction. Instead, the accelerated growth of the U.S. economy has further bolstered demand for commercial space, driving up the segment's construction backlog in the process. Backlog in the heavy industrial category reached an all-time high of 7.8 months during the second quarter, a testament to the ongoing expansion of industrial production in the United States. Construction spending related to manufacturing had declined in recent years but exhibited growth during the second quarter. Tariffs, potential trade wars and rising input prices remain risks to this segment's near-term outlook. Backlog in the infrastructure category edged higher during the second quarter to 10.1 months. Despite the lack of a federal infrastructure package, a number of state governments are meaningfully increasing public infrastructure outlays as their finances continue to improve in conjunction with the U.S. economy, now in its 10thyear of expansion. Based on U.S. Census Bureau data, construction spending in the water supply category is up 29 percent on a year-over-year basis, conservation and development (e.g. flood control) by 24 percent, transportation by nearly 21 percent, public safety-related spending by 17 percent and sewage and waste disposal by 11 percent. BUILDING ALABAMA | INDUSTRY OUTLOOK & TRENDS ABC CONSTRUCTION BACKLOG INDICATOR Q1 2010-Q2 2018 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Months of Backlog HIGHLIGHTS BY COMPANY SIZE Large firms with annual revenues in excess of $100 million experienced a sharp increase in backlog. Surging business confidence would have a tendency to result in larger, potentially more risky projects moving forward. This disproportionately inures to the benefit of larger firms with the capacity to handle such projects. This segment's backlog has increased by 2.4 months over the past year. Average backlog among firms with annual revenues between $50 million and $100 million increased by half a month and now stands at 11.6 months. Backlog in this segment has steadily ratcheted higher since a cyclical low experienced during the first quarter of 2016. Backlog for firms with between $30 million and $50 million in annual revenues surged 61 percent during the second quarter. Increased survey participation may be an underlying cause of this segment's observed construction backlog volatility. However, even if one excludes new entrants to the survey, backlog among this group, which includes many specialty trade contractors, has clearly risen robustly over the past year. Backlog for firms with annual revenues of less than $30 million increased to 8.5 months during the second quarter, an all-time high. Backlog in this segment has risen almost precisely by a month over the past year.

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