Economist Predicts Increase In Commercial Projects in ‘13

The Construction Backlog Indicator tracked by the Association of Builders and Contractors “is signaling that nonresidential construction spending will accelerate by mid-2013,” ABC chief economist Anirban Basu said in a recent report.

He warned, though, this is contingent on the nation not tumbling over the “fiscal cliff” — a series of spending cuts and tax increases that will kick in at the end of the year unless Congress intervenes.

In the third quarter, the indicator rose 3.5 percent over the previous quarter for a backlog of up to eight months.

The indicator measures the amount of construction work under contract to be completed in the future. A backlog of less than eight months is statistically associated with construction spending declines, while a backlog of more than eight months indicates future spending increases.

Basu wrote that progress will likely be gradual in the first half of the year, “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 recovery in the second half.

The South, which has been leading the nation in future construction spending, was surpassed by the West in the third quarter. The South had a backlog of 8.45 months, down from 9.41 a year earlier, while the West’s backlog grew year-over-year from 7.4 months to 8.93.

The Middle States and Northwest saw slight increases in backlog.

Basu attributed the slowdown in the South “in part to significant slowing in industrial production, softness in the economies of Alabama and Mississippi, and low natural gas prices, which has impacted energy-related investment.”