Construction backlog drops to 8.1 months as non-data center work slows
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Construction backlog fell to 8.1 months in October, according to Associated Builders and Contractors, as contractors outside the data center market watched their pipelines shrink.
ABC’s Construction Backlog Indicator dropped 0.6 months from September and now sits 0.3 months below its level a year earlier. The figures come from an ABC member survey conducted Oct. 20 to Nov. 3 and published Nov. 10.
The headline number hides a sharp split. The 88% of contractors with no data center work saw their backlog fall from 8.3 months to 7.6 months. Contractors building data centers moved the other way, from 11.3 months to 11.5 months.
That gap of almost 4 months tells readers more about the market than the monthly drop does.
Data center construction is holding up the headline numbers
“Backlog fell sharply in October, returning to levels not consistently observed since last winter,” said ABC Chief Economist Anirban Basu. He attributed the decline largely to worsening prospects for contractors without data center contracts.
The firms still building data centers are a minority of the market, but a large one by revenue. According to Basu, most contractors with data center work have more than $100 million in annual revenues.
For everyone else, the trend is weaker. A backlog of 7.6 months is still a meaningful pipeline, but the direction matters. A fall of 0.7 months in a single month for most of the market suggests new contracts are not replacing completed work quickly enough.
Backlog measures work under contract but not yet completed, expressed in months, so it gives an early read on the activity ahead. When it shrinks, contractors can face more competition for the projects that remain, which tends to put pressure on bid prices before it shows up in revenue.
The result is a two-speed market. Larger firms with data center contracts have more than 11 months of work lined up. Contractors relying on other commercial, institutional, and public work have noticeably less.
Infrastructure backlog falls as heavy industrial climbs
The category data adds another layer. Backlog in the infrastructure category fell to 8.7 months, its lowest level since May 2025. Heavy industrial backlog moved in the opposite direction, rising to a 15-month high.
ABC’s release does not explain either move. Infrastructure work relies heavily on public funding, so a shrinking pipeline in that category points to fewer new awards reaching contractors, whatever the cause. Heavy industrial strength, meanwhile, shows that some large private projects are still moving forward.
Taken together, the 2 categories reinforce the same picture. Demand is concentrating in fewer, larger project types, while the broader base of work is thinning.
Margin expectations rise while sales and staffing outlooks fall
ABC’s Construction Confidence Index, which tracks contractor expectations for the next 6 months, sent mixed signals. The reading for profit margins increased in October, while the readings for sales and staffing levels fell. All 3 remain above 50, the threshold that indicates expectations for growth.
“Despite the decline in backlog and worsening sales and staffing expectations, contractor optimism regarding profit margins improved in October,” Basu said. “This is encouraging given recent increases in materials prices and borrowing costs, although it should be noted that roughly 1 in 4 contractors still expect their margins to shrink over the next six months.”
That combination is unusual. Contractors expect to sell less work and hire fewer people, yet their outlook for margins has improved.
One explanation is that firms are pricing more carefully and walking away from thinner-margin jobs as their backlog shrinks. Another is that data center contractors, with longer pipelines and more pricing power, are lifting the average. The release does not say which explanation holds, and both could be true at once.
For contractors without a foothold in data centers, the next few readings will show whether October was a dip or the start of a longer slide. If their backlog keeps falling while data center pipelines hold, the industry’s headline figures will increasingly reflect the fortunes of a small group of large firms. Whether that group keeps growing, and whether the rest of the market can win enough new work to replace what it completes, remains the open question heading into 2027.
Source:
Associated Builders and Contractors
