The construction industry is heading into summer 2026 on stronger footing than a year ago, with backlog and contractor confidence both outpacing year-ago levels despite a volatile cost environment.
Associated Builders and Contractors reported that its Construction Backlog Indicator rose to 8.6 months in March, up 0.5 months from February and above March 2025. The reading marks a full recovery from January’s four-year low and signals that demand for construction services remains solid across most sectors.
"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 ABC Chief Economist Anirban Basu.
All three components of ABC’s Construction Confidence Index, covering profit margins, staffing levels and sales, remain above the 50 threshold that signals expected growth over the next six months. Each reading is higher than it was one year ago. The data center sector is leading the way, with contractors performing that work reporting 10.6 months of backlog compared to 8.3 months for those without. Infrastructure sits at 10.1 months, while heavy industrial, the segment most relevant to Gulf Coast energy and petrochemical work, registers 6.9 months.
The South posted the highest regional backlog at 9.4 months. The biggest challenge facing that otherwise healthy picture is cost. Construction input prices surged 2.2% in March compared to February, the largest monthly jump since 2022, and materials prices are now up 4.8% year over year, the largest annual increase since January 2023. Oil is the primary driver, with diesel rising steeply since late February following the escalation of the Iran conflict. Because diesel is built into the cost of shipping virtually every construction material, those increases reach across all sectors and project types.
"This monthly increase is due to higher oil prices, a direct result of conflict in Iran, and it remains to be seen how that seismic geopolitical event will affect other input prices in the months to come," Basu said. "Contractors remained confident that their profit margins would continue to grow, and it will be interesting to see if that optimism persists in the event of prolonged oil market strife."
For contractors working to protect those margins, the policy environment adds another layer of complexity. Jurisdictions across the country are introducing contractor safety record requirements, expanded worksite inspection authority and minimum wage mandates for public contract workers. ABC supports safe jobsites and fair workforce standards, but policies that rely on administrative lookback periods rather than demonstrated performance can raise project costs, reduce bidder pools and disadvantage the small and specialty contractors who keep industrial construction moving. Programs like ABC’s Safety Training Evaluation Process, a nationally recognized safety management system, consistently deliver better safety outcomes than compliance-checklist approaches alone.
The industry enters this period from a position of strength. Backlog is up, confidence is up and demand in key sectors remains firm. The contractors who hold that ground will be the ones who manage cost exposure carefully, invest in workforce and safety culture and stay engaged as the policy landscape continues to shift.
For more information, visit abchouston.org.
