Home » MBJ FEATURE » CONSTRUCTION HIT THE BRAKES AFTER STRONG 2011 START — Dwindling backlog of work explains why quest for contracts is very competitive in Mississippi

CONSTRUCTION HIT THE BRAKES AFTER STRONG 2011 START — Dwindling backlog of work explains why quest for contracts is very competitive in Mississippi

A second quarter national construction surge that created an 8-month backlog of work fizzled out by the end of the year, an analysis by the chief economist for the national chapter of Associated Builders and Contractors shows.
It’s news that the head of the Mississippi chapter of the Associated Builders and Contractors expected to hear. With competition for contracts as fierce as it has been, builders and contractors clearly do not have much of a backlog of work to fall back on, said Buddy Edens, CEO-president of the Mississippi ABC, a Jackson-based merit-shop organization.
“We have seen a small increase in activity over last year but nothing significant,” he said.
The work that is out there has drawn large numbers of bidders, he said. “It has been very, very competitive.”
Edens said he does not expect to see growth in Mississippi’s backlog this year.  “I don’t anticipate anything significant to happen until 2013 and 2014.”
The decrease nationally in the construction backlog indicates a degree of stalling in the industry’s recovery likely caused by the soft patch that developed in the broader economy early last year, the winding down of federal stimulus projects and seasonal factors, said Anirban Basu, chief economist for the national ABC chapter.
He blamed some of the mid-year decline on “debt ceiling games” played by Congress in August, noting data up to that point “showed that the U.S. economy was slowly recovering.”
On the upside, Basu said, the end-of-year numbers also reflect the ongoing expansion in privately funded construction activity as opposed to publicly funded construction. Edens said he, too, has witnessed some strengthening in private sector construction around Mississippi. “That’s a positive sign,” he said.
It’s especially positive for smaller construction companies, according to Basu. “The nation’s smaller construction firms are getting an advantage from this shift, in contrast to the decreased construction activity among the larger firms that had benefited from earlier federal stimulus projects and military base realignment-related construction.”
Basu said the “Construction Backlog Indicator” he uses in his analysis is the only forward-looking national economic indicator that measures the amount of construction work under contract to be completed in the future.
Even with the eventual dying out of the mid-year surge, the backlog of construction projects at the end of 2011 exceeded the backlog of the previous year’s fourth quarter by 10.9 percent.
In comparing third quarter to the fourth quarter, Basu said the backlog decreased 3.2 percent, going from 8.1 months in Q3 to 7.8 months in the final quarter.
The momentum from earlier in 2011 was sufficient to make 2011 a markedly better year for construction than was 2010, according to Basu.
The national economist is hardly prone to rosy scenarios, based on interviews and an address to builders in Jackson in fall 2010 in which he predicted the lone hope for construction nationally in 2011 was a year that would be “less bad” than the previous one.
Backlog numbers show he was correct. For the year ahead, he is predicting renewed strength. “The good news is that given the recent acceleration in economic and employment growth, CBI is positioned to rebound more forcefully during the quarters ahead,” Basu said.
Here are regional highlights from his fourth quarter report:
>> Construction backlog expanded in the Northeast from the third quarter to the fourth quarter, but declined in the South and West, and was essentially unchanged in the Middle States.
>> Construction backlog is higher in every region of the nation compared to one year ago.
>> Companies in the South, some of which are in high-growth states such as Louisiana, Oklahoma and Texas, reported the lengthiest backlog at 8.9 months, up 14.7 percent from the fourth quarter of 2010.
Basu said the construction backlog in the commercial and institutional segments fell from 8.4 months in the third quarter of 2011 to 7.8 months in the fourth quarter, but remains 11.4 percent above the level reported one year ago.
Meanwhile, Mississippi’s commercial construction sector must still wait for a huge amount of product to be absorbed, according to Edens, the ABC chief for Mississippi.
Office space in metro Jackson is about 40 percent vacant, he noted. “There ‘s a lot of stuff on the market.”
And this could be the year that the long-predicted large-scale commercial foreclosures could occur. “Experts tell us we are still going to see tremendous foreclosures on commercial office space,” he said.

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