Data centre boom ‘masks weakness’ as US contractors see order backlog drop

The ABC’s Construction Backlog Indicator fell to 8.0 months, down 0.8 months on both a month and a year ago.

Every industry, region, and company size experienced a decline in backlog in July, according to the ABC. The only region with a larger backlog than a year ago is the South, it found.

The ABC Construction Confidence Index readings for sales and staffing levels also fell in July, while the reading for profit margins increased. But the readings for all three components was above 50, which indicates that contractors expect growth over the next six months.

“Backlog fell sharply in July and is down to the lowest level since January,” said ABC chief economist Anirban Basu. “The data centre boom masks the depth of this weakness, as there is a lack of momentum in any other segment. The 88% of ABC contractors that are not under contract to work on a data centre had an average 7.5 months of backlog. That compares poorly to the 12% that are under contract to work on data centres, which have 11.4 months of backlog. This dynamic has been particularly difficult for small and mid-size contractors. Backlog in the $30-$50 million annual revenue category, for instance, fell to the lowest level since March 2020.”

The news followed analysis from the Associated General Contractors of America (AGC) earlier this month that found overall construction spending dropped 0.1% in June and would have dropped further had it not been for a strong increase in spending on data centre.