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Jun 13, 2025 - Construction Backlog Softens

• The Associated Builders and Contractors (ABC) Construction Backlog Indicator fell 0.1 months to 8.4 months in May compared to a year earlier. May backlogs were down 0.3 months from April. The heavy industrial backlog increased by 1.3 months in May from a year earlier. However, May’s commercial and institutional construction backlog fell 0.3 months to 8.8 months year-over-year, and the infrastructure backlog fell by 0.2 months to 6.8 months. The ABC’s Construction Confidence Index for sales fell to 60.4 in May from 62.1 in April. A Confidence Index sales reading of 50 or more indicates most contractors are optimistic about sales. ABC Chief Economist Anirban Basu said, “The impacts of tariffs are increasingly apparent, with nearly 1 in 4 ABC member contractors reporting tariff-related project cancellations or delays in May,” While 87% of survey respondents have been notified of tariff-related materials price increases, profit margin expectations actually improved in May.”
• The Dodge Momentum Index (DMI) increased 3.7% in May 2025 to 211.2 (2000=100), up from the revised April reading of 203.5. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the institutional planning component improved by 10.5%, and commercial planning rose 0.8%. Dodge’s associate director of forecasting, Sarah Martin, said, “Nonresidential planning continued to accelerate in May, primarily driven by strong project activity on the institutional side of the DMI. Planning momentum moderately improved on the commercial side as well, following subdued growth in that sector over the last few months – outside of data centers. Increased economic and policy uncertainty will continue to contribute to heightened volatility in the project data – but in aggregate, planning activity is on steady footing.”

• So-called “missing middle” medium-density housing, which includes duplexes, townhouses, and other smaller multifamily properties, has gained in popularity over the last several quarters, according to the National Association of Home Builders. Multifamily properties in the missing middle (2 to 4 units) have generally been out of favor since the Great Recession, but they are experiencing a resurgence. In the first quarter of 2025, there were 5,000 construction starts for housing properties with 2 to 4 units, which was flat compared to a year earlier. However, over the past four quarters, the number of missing middle residential construction units reached 23,000, marking a 53% increase over the four quarters before that period. The missing middle segment’s gains may be limited absent zoning reform that allows for increased density.
• North American construction and engineering spending in 2025 is expected to grow by 2% after increasing an estimated 7% in 2024, according to FMI’s second-quarter 2025 North American Engineering and Construction Outlook. Nonbuilding construction will lead growth in 2025, supported by solid public funding commitments with bipartisan support. Water projects will lead infrastructure spending growth in 2025 with a rise of 8%, followed by power (6%), sewage and waste disposal (6%), and highway and street (2%). Single-family construction spending is forecast to rise by 3% in 2025, but headwinds include higher costs due to materials tariffs, tighter immigration enforcement, and a lack of affordability. A recent jump in new apartment supply and unfavorable cost conditions will reduce multifamily spending by 12% in 2025. Nonresidential building construction spending will be flat in 2025, as steady growth in segments including amusement and recreation, educational, transportation, and communication will be offset by weakness in lodging and commercial.