U.S. contractors are showing renewed confidence and stronger project pipelines, even as rising material costs and geopolitical tensions continue to pressure the construction industry.
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According to new data from Associated Builders and Contractors, the Construction Backlog Indicator climbed to 8.6 months in March, reflecting a 0.5-month increase from February and a slight uptick year over year. The rebound marks a recovery from a four-year low recorded earlier in 2026.
A key driver of this growth has been the ongoing surge in data center construction, which continues to outperform other sectors.
Contractors involved in data center projects reported significantly stronger backlogs than those without such work. Firms engaged in the sector — representing about 15% of those surveyed — held an average backlog of 10.6 months, compared to 8.3 months for others.
The data underscores the growing influence of digital infrastructure development on the broader construction market. As demand for cloud computing, artificial intelligence and data storage accelerates, data center construction has emerged as a major source of steady work for contractors.
At the same time, contractor sentiment remains positive. The Construction Confidence Index showed improved expectations for profit margins, staffing levels and sales compared to the same period last year, although sales expectations dipped slightly from February.
Despite the upbeat outlook, cost pressures remain a significant concern. Data analyzed alongside U.S. Bureau of Labor Statistics figures shows nonresidential construction input prices rose 2.3% in March compared to February.
On an annual basis, overall construction input costs increased 4.8%, while nonresidential inputs rose 5.4%. Much of this increase has been attributed to higher oil prices linked to geopolitical tensions, including the ongoing conflict involving the United States, Israel and Iran.
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“Backlog has fully rebounded from January’s four-year low and, at 8.6 months, is now back to levels not seen since last summer,” said Anirban Basu, chief economist at Associated Builders and Contractors. “Contractors appear unphased by the sharp rise in oil prices precipitated by the conflict in Iran.”
Basu also noted improving labor outlooks despite recent hiring slowdowns.
“Staffing expectations, up in each of the past four months, are now at the highest level since April 2022,” he said. “This increase is particularly surprising given that the industry’s hiring rate fell to the lowest level ever recorded in February, although it aligns neatly with the uptick in employment growth observed in the March jobs report.”
Still, uncertainty remains tied to global developments. Basu warned that prolonged geopolitical conflict could continue to drive up borrowing costs and material prices, potentially impacting future construction activity.
For now, however, strong demand — particularly from data center projects — appears to be cushioning the industry from broader economic headwinds.
Originally reported by Neil Gerrard, in Construction Briefing.
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