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Construction backlogs rise for second consecutive quarter

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Average construction backlogs rose to eight months in the third quarter, up 3.5% from the previous quarter, and the second consecutive quarter of such growth, according to data compiled by the Washington, D.C.-based Associated Builders and Contractors (ABC).

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Midwest backlogs also rose for a second consecutive quarter – from 6.50 months to  6.97 months --  but continued to lag averages in the West (8.93 months), South (8.45 months) and Northeast (7.62 months).

“Gradual recovery characterizes the Middle States region, though certain communities such as energy-rich North Dakota, economically vibrant Minnesota and states with rebounding auto manufacturing sectors like Indiana are experiencing faster construction spending growth,” says ABC chief economist Anirban Basu. “By contrast, construction activity in the South has waned, due 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.”

Construction backlogs rose for all three industrial segments except for infrastructure, “the category most susceptible to the impending fiscal cliff,” says Basu. “It's the only category that didn't experience rising backlog during the third quarter.”

At 6.72 months, backlogs in heavy industrial reached their highest levels since the second quarter of 2010.

By comparison, backlogs in the commercial and institutional segment currently average 7.2 months, it's highest level in a year.

“With the exception of the commercial construction category, average backlog among construction firms is roughly the same as two years ago, a reflection of just how soft the nonresidential construction recovery has been for many contractors,” Basu says. “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.”

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