Large firms drive backlog gains while tariff concerns trigger project delays and rising material costs

Despite mounting tariff-related challenges, construction backlogs rose to their highest point in nearly two years, and contractors remain generally optimistic about profit margins, according to a recent survey conducted by Associated Builders and Contractors (ABC) between April 22 and May 6.

The increase in backlog — which refers to the amount of work contractors are contracted to complete in the future — was largely driven by firms with more than $100 million in annual revenue, according to ABC. While small contractors also saw some improvement, those with annual revenues between $30 million and $100 million experienced a year-over-year decline in backlog.

“Nearly 22% of contractors had a project delayed or canceled in April due to tariffs, up from 18% in March, while 87% have been notified of tariff-related materials prices increases,” said Anirban Basu, ABC chief economist.

Contractors Stay Busy Amid Headwinds

The latest figures offer insight into how construction firms are navigating a turbulent economic landscape shaped in part by continued uncertainty around trade policies and materials pricing. The ripple effects of tariffs have been felt in procurement and scheduling — yet many builders remain active and optimistic.

Basu noted that despite the complications, many contractors are not slowing down. “While ABC members remain upbeat about the near-term outlook, the share of respondents that expect their sales to decline over the next six months rose to 19% in April, up 6 percentage points since the start of the year,” he said.

That rising concern signals a shift in sentiment, even as project backlogs remain high. Although confidence in near-term profitability is up, contractors may be preparing for a dip in new project starts or award activity later in the year.

Sector-by-Sector Shifts

While commercial and institutional projects showed a slight uptick in backlog during the April survey period, heavy industrial and infrastructure sectors both saw declines — a notable reversal from the previous month’s readings.

ABC reported that although overall readings for sales, staffing, and profit margins all remain above the 50-point threshold (indicating growth expectations), the data suggests some cooling. Profit margin expectations in particular showed improvement in April, even as expectations for future sales and staffing tapered slightly.

This divergence could reflect contractors' growing emphasis on project selectivity, cost control, or more cautious resource planning as materials prices continue to be affected by tariffs.

Data Centers Lead Planning Activity

In a related trend, data centers continue to dominate U.S. construction planning activity, according to the April Dodge Momentum Index. That boom, driven by demand for cloud computing and AI infrastructure, contrasts with weaker performance in other construction sectors that have been slower to recover or are facing financing headwinds.

As the industry adapts to shifting demand and economic pressure points, many firms are responding with diversification strategies and a focus on profitability over volume. Yet the impact of tariffs remains a pressing issue, with delayed timelines, price hikes, and supply chain uncertainty looming large for firms of all sizes.

Originally reported by Matthew Thibault in Construction Dive.