WASHINGTON — The Associated Builders and Contractors (ABC) reported its Construction Backlog Indicator rose to 8.7 months in June, according to a recent member survey conducted from June 20 to July 7. That’s an increase of 0.3 months compared to June 2024, signaling resilience in the sector despite recent spending slowdowns.

The data shows that the largest contractors now have nearly two months more backlog than a year ago, while smaller contractors have also seen modest gains. However, firms with annual revenues between $30 million and $100 million experienced a slight decline in backlog.

ABC’s Construction Confidence Index also showed mixed trends: readings for sales and profit margins improved in May, while staffing levels dipped slightly. All three measures remain above 50, indicating most contractors still expect growth over the next six months.

“Despite a wide array of headwinds and disappointing construction spending data in recent months, backlog rebounded to 8.7 months in June, the same level as in April,” said ABC Chief Economist Anirban Basu. He noted that strong demand for data centers is a key factor: “The durability of contractor backlog is partially due to the ongoing boom in data center construction; 1 in 7 ABC members is currently under contract to perform work on a data center.”

Basu added that optimism remains high: “In addition to longer backlog, contractors remain broadly optimistic, with 3 in 5 contractors expecting their sales to rise during the second half of 2025.”

However, new trade policies and tariffs could affect margins moving forward. “Notably, this survey predates the most recent trade policy announcements, and 1 in 5 contractors had a project interrupted or paused due to tariffs in June,” Basu said. “With some of the newest import taxes putting upward pressure on construction input prices, profit margin expectations may face pressure in the months to come.”

Key Sector Driver

‍The sustained backlog reflects the continuing data center boom. With AI, cloud computing and digital infrastructure growth, contractors tied to tech-related work are booking long-term contracts that help stabilize pipelines.

Watch for Headwinds

‍While backlog growth is encouraging, firms need to watch material cost spikes from new tariffs. Contractors should revisit supply chain strategies to hedge against input price increases that could tighten margins in late 2025.

Labor Outlook

‍The dip in staffing confidence hints at an ongoing labor squeeze, especially for specialized trades tied to complex data center projects. Firms may need to compete harder for skilled workers or invest in workforce development to deliver on backlog commitments.

Near-Term Priorities

‍With 60% of firms expecting sales to rise, contractors are likely to ramp up bids, invest in equipment, and secure subcontractor capacity through the second half of the year — but cautious budgeting will be key if profit pressures grow.

Originally reported by Dakota Smith in Woodworking Network.