After a temporary dip at the end of summer, builders' work volumes increased once more in September, fueled by the Federal Reserve’s recent interest rate cut. According to an Oct. 15 report from Associated Builders and Contractors, “What a difference a half-point rate cut makes.”

The pipeline of work for builders rose to 8.6 months, up from 8.2 in August, signaling renewed confidence in the sector. While all regions except the Northeast saw an increase in backlog, it’s important to note that most areas are still trailing behind last year’s figures, with only the central states showing a year-over-year increase.

“Contractors are back to expecting modest expansion in their margins as of September,” stated Anirban Basu, ABC’s chief economist, in a news release. “This optimism likely reflects falling interest rates, which will eventually serve as a tailwind for the industry, and the fact that materials prices have actually declined over the past year.”

The upward trend in backlog was evident across various company sizes, with firms earning less than $30 million annually adding work at a pace comparable to those with revenues over $100 million. Contractors in the $30 million to $50 million range maintained their levels, with no reported declines.

Despite this encouraging rebound, Basu pointed out that contractor confidence and backlog are still lower than a year ago, indicating that the lingering effects of high interest rates are impacting the industry.

September’s growth suggests that the construction sector may be moving closer to the “soft landing” the Federal Reserve had in mind by maintaining elevated interest rates until its cut on Sept. 18. Prior to this, expectations for profit margins had dipped below 50, signaling potential contraction. However, the latest uptick has pushed that figure to 50.9, indicating that contractors are anticipating greater expansion ahead.