|“While backlog has been stable over the past two months, current readings may be hiding some latent weakness,” said ABC Chief Economist Anirban Basu. “Many contractors indicate that projects are being placed on hold. Some of this may be due to public health or jobsite-specific concerns, but tighter financial conditions also play a role. When projects are postponed, they remain embedded within contractor backlog, but near-term revenue suffers and the probability of outright project cancellation rises.
“Contractors are also reporting greater competition for projects, which is consistent with suppressed profit margins,” said Basu. “Nearly two in five contractors expect profit margins to shrink over the next six months, with nearly 9% expecting a sharp hit to margins. A year ago, fewer than 1% of contractors expected a sharp contraction in margins and a majority expected margins to keep rising. According to the latest survey, fewer than one in three contractors expect margins to rise over the next six months.”