The U.S. construction industry saw a modest rebound in project backlog during February, though the recovery remains uneven across company sizes and sectors.
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According to new data from Associated Builders and Contractors, the Construction Backlog Indicator increased slightly to 8.1 months in February, climbing from a four-year low recorded the previous month.
However, the increase was not evenly distributed across the industry. Large contractors and firms working on data center projects reported significantly higher backlogs compared with smaller builders or those focused on other types of construction.
Contractors generating more than $100 million in annual revenue reported an average backlog of 12.1 months, well above the industry average. Companies involved in building data centers also reported strong workloads, with 11.2 months of projects in their pipeline.
By contrast, contractors without data center work reported only 7.6 months of backlog, highlighting a growing divide in the industry.
Economists say the continued surge in artificial intelligence infrastructure and cloud computing demand has driven significant investment in data center construction, benefiting firms with the expertise and scale to handle those complex projects.
Despite the slight monthly improvement, total industry backlog was down 0.2 months year over year, indicating that construction activity remains somewhat constrained by broader economic factors.
“While data center work should continue apace over the next few quarters, the conflict in Iran … may suppress demand for other forms of construction work due to elevated materials prices, borrowing costs and uncertainty,” said Anirban Basu.
Regional performance also varied significantly across the country.
The Middle States region, which includes much of the Midwest, recorded the largest month-to-month improvement in backlog levels, rising by a full month between January and February.
It was also the only region to record year-over-year growth, with backlog increasing by 1.2 months compared with the same period last year.
“It’s notable that backlog growth has been confined to the Middle States region,” Basu said. “After struggling in the immediate aftermath of the pandemic, the Midwest has posted surprisingly strong population and economic growth over the past year, and that growth has clearly translated into increased levels of construction activity.”
Economists say the region’s economic rebound and population growth have fueled stronger demand for commercial and industrial construction projects.
Performance also varied by construction sector.
The commercial and institutional and heavy industrial sectors recorded modest month-over-month increases in backlog during February.
Meanwhile, the infrastructure segment saw a decline after a strong January performance. Backlog in that sector fell to 8.9 months, down from 10 months in the previous month.
Industry analysts note that infrastructure work can fluctuate based on the timing of large public projects and funding cycles.
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Despite uneven backlog levels, contractor sentiment about the near-term future remained generally positive.
The Construction Confidence Index, which tracks contractor expectations over the next six months, showed increases in sales and hiring expectations.
Although expectations for profit margin growth declined slightly from the previous month, all three indicators remained above the neutral level of 50, signaling continued optimism among contractors.
“While contractors remain slightly optimistic that their profit margins will expand over the next six months, that confidence may not survive the recent and precipitous increase in oil prices,” Basu said. “Rising input costs, if persistent, could weigh on hiring expectations, which were particularly upbeat in February. The CCI series for staffing level expectations rose to the highest level since March 2025.”
Industry observers say rising material costs, geopolitical uncertainty and interest rate pressures could influence project pipelines later in the year. However, strong demand for digital infrastructure, manufacturing facilities and energy projects continues to support construction activity in key sectors.
Originally reported by Joe Bousquin, Senior Editor in Construction Dive.
