Australia's economy shows resilience, but storm clouds lie ahead

This article from The Australian talks about how firms there invested strongly in the fourth quarter despite the global crisis, but Australia's treasurer says that Treasury forecasts released earlier this month show that business investment will slow in the coming months.

Private new capital spending on buildings and equipment in Australia rose 6 percent to $24.89 billion in the fourth quarter of 2008 from $23.49 billion in the third quarter, according to the Australian Bureau of Statistics. Economists on average expected that spending in the fourth quarter 2008 would fall 3.3 percent on a quarterly basis, and rise 5 percent for the year.

The strength in investment increases the chance that Australia's economy continued to grow in the closing quarter of 2008. Forward estimates of investment were scaled back, but not by the 10 percent to 20 percent range expected by some economists.

The article states that the data highlights the relative strength of the Australian economy amid the global crisis, raising expectations that its own downturn will be shallow by comparison to major economies.

Economists said forecasts for economic growth in the fourth quarter are likely to be nudged higher. They also say the latest data should encourage expectations that the Reserve Bank will keep interest rates steady at a policy meeting next week.

According to a senior economist at RBC Capital Markets, the data shows surprising strength, but it is likely to be the 'last wave' of spending. She said the numbers are probably a residual effect of the investment boom that fueled the economy in recent years, but that the outlook will still be 'soft.'

Ed

More news from Down Under

Remember that post from last week about how the AIA had released pro bono guidelines for architects? Well, it turns out architects in Australia are offering their services on an initial pro bono basis to local councils for projects worth more than $1 billion under a partnership between the Australian Local Government Association and the Australian Institute of Architects.

According to a release posted on www.architecture.co.au, the projects are for the construction of community facilities such as sports grounds, libraries, sports centers, and town halls. A total of $500 million will be allocated to councils under the Regional and Local Community Infrastructure Program, which is a key part of the federal government's stimulus packages. Additional expenditure is expected to be contributed by councils.

In announcing the partnership, both ALGA and Australian Institute of Architects officials said architects could help councils, particularly small and under-resourced councils, ensure that projects are submitted by the March 6 deadline.

The Australian Federal Government will give preference to projects that can be commenced within six months of signing a funding agreement and which can be substantially completed by the end of next year.

No word in the press release about "shovel ready" projects, by the way.

Ed

What constitutes "shovel ready"?

With so much talk lately about "shovel ready" projects and how they will benefit from the economic stimulus bill signed into law earlier this week by President Obama, this is an interesting article about what in Terre Haute, Indiana, counts as a "shovel-ready" project.

While lots of projects seem shovel ready, in fact, only two projects in the city of Terre Haute are shovel ready. As the city's mayor, Duke Bennett, says in the article, there are many restrictions in the stimulus bill, which keeps many projects from qualifying as shovel ready.

"To be truly shovel ready, you have to have engineering drawings, you basically have to have the thing totally designed," Bennett says in the article. "Then you have to have your environmental work done and you have to have all your property acquisition done."

If a project receives any federal funding, it is not eligible for stimulus money, according to the article.

For an analysis of how the stimulus bill will impact the AEC industry, check out The Obama Infrastructure Plan: A Supplement to PSMJ's 2009 AEC Firm U.S. Market Sector Forecast. Free with your order, you'll also receive PSMJ's Analysis of Economic Indicators for Markets Served by A/E Firms: 1st Quarter 2009. This report provides quantitative data on major market sectors AND the submarkets and regions that the North American A/E industry serves.

Ed

AIA releases pro bono guidelines for members...huh?

We found the AIA's e-mail this week touting its just-released AIA Pro Bono Guidelines for AIA Membes and Firms interesting, to say the least. And we weren't alone. Take it from PSMJ Founder and CEO Frank Stasiowski, who said, "Great timing...now architects should work for FREE...unbelievable."

The AIA does acknowledge that during tough economic times, not-for-profit groups are stretched beyond their capacity and that architects and design professionals can help solve issues facing communities. And the AIA's marketing copy for the Guidelines claim that pro bono work offers public awareness and prestige, as well as marketing that money can't buy.

But it's a bit of a logic leap to suggest that firms struggling to keep the lights on and keep their people busy, or employed at all, should work for free. Good idea, bad time for it.

Ed

$787 billion stimulus package signed into law

President Barack Obama yesterday signed into law the massive $787 billion economic stimulus bill that he claimed will, among other things, rebuild the nation's crumbling infrastructure and schools.

ENR and the Associated General Contractors estimate that the package provides more than $130 billion in construction spending, with transportation receiving the largest share-- more than $49 billion, with $27.5 billion of that for highways.

High-speed rail received $9.3 billion in funding while school construction has no specified funding in the final package even though the original House bill had $20 billion and the original Senate bill had $19.5 billion, according to ENR. However, lawmakers did allow school modernization projects to be eligible for some of the $39.5 billion in "state fiscal stabilization" funds set aside for a range of educational purposes. It's up to local school districts to decide how much of their shares of that $39.5 billion would go for such uses as hiring or retaining teachers or for upgrading buildings, according to the ENR article.

For an analysis of how the stimulus bill will impact the AEC industry, check out The Obama Infrastructure Plan: A Supplement to PSMJ's 2009 AEC Firm U.S. Market Sector Forecast. Free with your order, you'll also receive PSMJ's Analysis of Economic Indicators for Markets Served by A/E Firms: 1st Quarter 2009. This report provides quantitative data on major market sectors AND the submarkets and regions that the North American A/E industry serves.

Ed

Architecture Billings Index hits a(nother) all-time low

Proving that December's slight increase was nothing more than a fluke, the AIA's Architecture Billings Index dropped to a historic low level in January.

Following consecutive months with record low scores, the December ABI rating was 34.1. (The AIA originally announced that the December 2008 ABI was 36.4, but according to a press release announcing the January numbers, "Every January, the AIA research department uses a formula from the Department of Commerce that re-estimates ABI data based on seasonal factors, resulting in a recalibration of recent figures." That explains the discrepancy.)

However, the American Institute of Architects reported the January ABI rating was 33.3, which marks the lowest rating for the index since its inception in 1995. Any score above 50 indicates an increase in billing. The inquiries for new projects score was 43.5, up from the adjusted figure of 38.5 in December. Because the index is a leading indicator of construction activity, the ABI shows an approximate 9- to 12-month lag time between architecture billing and construction spending. This means we will likely not see much construction activity in 2009.

"Now that the stimulus bill has passed and includes funding for construction projects, as well as for municipalities to raise bonds, business conditions could improve," said AIA Chief Economist Kermit Baker. "That said, until we can get a clearer sense of credit lines being made available by banks, it will be hard to gauge when a lot of projects that have been put on hold can get back online."

Regionally, the ABI breaks down as follows: West (38.3, up from the adjusted 37.1 figure in December), Midwest (34.6, up from the adjusted 34.3 in December), South (34.4, up from the adjusted 34.0 in December), and Northeast (29.8, down from the adjusted 31.9 in December). Sector by sector, the ABI breaks down thusly: mixed practice (39.6, down from the adjusted 41.5 in December), institutional (37.1, down from the adjusted 38.3 in December), commercial/industrial (33.8, down from the adjusted 30.4 in December), multi-family residential (29.5, which was also the adjusted number for December). According to the AIA, the regional and sectoral averages are three-month moving averages, due to the small sample size.

Ed

Senate narrowly approves stimulus package

By a 60-38 margin, the U.S. Senate approved the $787 billion recovery package on Friday night, keeping to the schedule outlined by President Barack Obama that calls for him to sign it into law by Presidents Day on Monday.

The U.S. House of Representatives approved the bill earlier on Friday by a 246-183 vote, with no Republicans voting in favor of it. In the Senate vote, the same three Republicans who voted for the earlier version of the stimulus package-- Susan Collins and Olympia Snowe of Maine, and Arlen Specter of Pennsylvania-- voted for the $787 billion measure.

The $787 billion stimulus bill includes about $120 billion for infrastructure-- new projects repairing bridges, roads, government buildings and more-- which is good news for the AEC industry.

The Congressional Budget Office has predicted that the plan will create between 1 million and 3 million jobs.

For an analysis of how the stimulus bill will impact the AEC industry, check out The Obama Infrastructure Plan: A Supplement to PSMJ's 2009 AEC Firm U.S. Market Sector Forecast. Free with your order, you'll also receive PSMJ's Analysis of Economic Indicators for Markets Served by A/E Firms: 1st Quarter 2009. This report provides quantitative data on major market sectors AND the submarkets and regions that the North American A/E industry serves.

Ed

House passes $787 billion economic stimulus bill

The U.S. House of Representatives earlier this afternoon approved a $787 billion economic stimulus bill by a 246-183 vote.

While a final Senate vote is expected to come as early as tonight, it is interesting to note that, once again, no House Republicans voted in favor of the bill and seven Democrats voted against it. In the Senate, at least three Republicans will have to vote for the stimulus bill for it to pass.

And that will prove especially difficult given that, according to published reports, Sen. Edward Kennedy, D-Mass., will not be present for the final vote and will instead be in Florida as he continues his recovery from brain cancer.

The House and Senate originally passed different versions of the bill; the House passing an $820 billion stimulus package last month, the Senate passing an $838 billion version on Tuesday. The votes Friday are on the $787 billion compromise version of the measure agreed to by a conference committee of both houses.

The stimulus package, if it is approved this weekend, will land on President Barack Obama's desk by Presidents Day on Monday, as he had requested.

Keep checking this blog as news develops on the stimulus package. We will be watching the Senate vote tonight and will post again once the vote has been tallied.

For its impact on the AEC industry, check out The Obama Infrastructure Plan: A Supplement to PSMJ's 2009 AEC Firm U.S. Market Sector Forecast. Free with your order, you'll also receive PSMJ's Analysis of Economic Indicators for Markets Served by A/E Firms: 1st Quarter 2009. This report provides quantitative data on major market sectors AND the submarkets and regions that the North American A/E industry serves.

Ed

Blagojevich probe includes AEC firms

Interesting Chicago Sun-Times article on Monday which states that federal investigators looking into their "pay-to-play" probe of former Illinois Gov. Rod Blagojevich are examining state bid proposals and other records from 18 prominent E/C firms that donated heavily to Blagojevich's campaign and got big contracts from the state and the city of Chicago.

According to the article, the 18 companies have made more than $3.6 million in campaign contributions since the mid 1990s. More than one third of that, about $1.3 million, went to Blagojevich, whose administration gave 11 of the companies $656 million in contracts since 2004.

The list of firms includes AECOM Companies, American Consulting Engineers (which is owned by AECOM Companies), Bernardin Lochmueller & Associates, Burns & McDonnell Engineering Inc., Castle Construction, Homer L. Chastain & Associates, Consoer Townsend Envirodyne Engineers (owned by AECOM Companies), Delta Engineering Inc., DLZ Illinois Inc., Environmental System Design, Globetrotters Engineering Corp., HNTB Corporation, Hutchison Engineering, Knight E/A Inc., MBB, McDonough Associates, Inc., Teng & Associates, and CH2M Hill Inc.

Contributions ranged from $7,000 (HNTB Corporation) to $148,726 (Knight E/A Inc.). The contracts awarded ranged from $2.7 million (Delta Engineering Inc.) to $111.2 million (Castle Construction).

Ed

Stimulus package now below $800 billion

House and Senate negotiators have agreed to lower the economic stimulus bill to $789 billion in an attempt to reach a compromise between the bills that each side has approved in recent weeks, according to an Associated Press article.

Several Democratic officials said there is an informal deadline of Wednesday afternoon for at least tentative agreement on an overall bill, according to the article. That timeline coincides with a scheduled formal meeting of House and Senate negotiators.

Sen. Max Baucus, D-Mont., one of the negotiators said in the article that there was agreement to hold the bill to $789 billion, tens of billions below the cost of both the House and Senate bills that had cleared in recent days, and that 35 percent of the total would be in the form of tax cuts.

There also appears to be a compromise on President Barack Obama's administration's demand for school construction funds, which were eliminated from the Senate version of the bill. Sen. Tom Harkin, D-Iowa, told reporters that $6 billion would be set aside, and officials said it would be limited to repair and modernization work.

The House last month passed an $820 billion stimulus package. The $838 billion Senate bill that cleared on Tuesday necessitated both houses negotiate a compromise bill that would then need to be reintroduced into both houses for passage before making their way to President Obama's desk for his signature into law. He has said he would like to sign the stimulus package into law on Presidents Day, which is Monday, February 16.

Keep checking this blog as news develops on the stimulus package. For its impact on the AEC industry, check out The Obama Infrastructure Plan: A Supplement to PSMJ's 2009 AEC Firm U.S. Market Sector Forecast. Free with your order, you'll also receive PSMJ's Analysis of Economic Indicators for Markets Served by A/E Firms: 1st Quarter 2009. This report provides quantitative data on major market sectors AND the submarkets and regions that the North American A/E industry serves.

Ed

Senate passes stimulus package

In the wake of the U.S. House of Representatives' passage of the $819 billion economic stimulus bill on Jan. 28, the U.S. Senate has passed President Barack Obama's economic recovery plan.

Just three Republicans helped pass the plan on a 61-37 vote, but with the Senate bill costing $838 billion, the House and Senate must now negotiate a final compromise on the bill before sending it to the president.

The Senate bill includes more than $108 billion in spending cuts made last week in Senate dealmaking, and the president wants to restore cuts in funds for school construction jobs and help for cash-starved states. Restoring those cuts could prove difficult, however, given that the three Republicans who helped pass the plan, Sens. Olympia Snowe and Susan Collins of Maine, and Sen. Arlen Specter of Pennsylvania, have indicated they want those cuts to remain in the stimulus package.

President Obama wants the legislation on his desk by Presidents Day, which is next Monday. According to numerous reports, negotiations between the House and Senate actually started before the Senate voted on the package.

Keep checking this blog as news develops on the stimulus package. For its impact on the AEC industry, check out The Obama Infrastructure Plan: A Supplement to PSMJ's 2009 AEC Firm U.S. Market Sector Forecast. Free with your order, you'll also receive PSMJ's Analysis of Economic Indicators for Markets Served by A/E Firms: 1st Quarter 2009. This report provides quantitative data on major market sectors AND the submarkets and regions that the North American A/E industry serves.

Ed

Consolidation in Canada?

Consider these two seemingly unrelated pieces of news from the Great White North:

1. GENIVAR Income Fund acquires two consulting firms: Envirotel 3000 Inc. in Sherbrooke and WSA Trenchless Consultants Inc. in Montreal. Envirotel specializes in environmental services while WSA specializes in municipal infrastructure. The firms have a combined total of 15 employees.

2. The Canadian government will spend $9.5 billion on road, bridge, public transit, water, and other infrastructure over the next two years. The funding is part of an overall $32 bbillion stimulus budget announced on January 27, according to ENR. More than 2,200 infrastructure projects could begin this spring if details are worked out, according to the mayor of Sherbrooke. The spending is part of an initiative to offset a trend of declining construction spending, the result of oil price declines in the Alberta oil sands region that have led to major project deferrals.

So, for those of you who thought a slowing economy and consolidation in the AEC industry was limited to the United States, think again.

Ed

You Say Hello, I Say Dubai

You may remember our post from a couple of weeks ago that Burt Hill had laid off 18 percent of its workforce in the United Arab Emirates.

Even if you don't remember that post, yesterday's press release that Langan Engineering & Environmental Services' wholly owned subsidiary, Langan International, had established two offices in the United Arab Emirates in Abu Dhabi and Dubai, is surprising.

As one insider told me this afternoon, "A lot of projects stopped in Dubai. The global economic crisis is truly global! I can't imagine why Langan would have opened an office in Dubai right now. Interesting!"

Indeed. If one company is shuttering its operations in what had been seen as a hotbed for AEC activity while another firm is opening not one, but two, offices, something's up.

Ed

Obama/Geithner: Exec Pay for Bailed Out Firms Capped at $500K

Treasury Secretary Tim Geithner and President Barack Obama have announced a proposal to cap the salaries of executives at companies receiving federal bailout money at $500,000.

Under Obama's plan, announced at a White House press conference this morning with Obama and Geithner, companies that want to pay their executives more than $500,000 will have to do through stocks that cannot be sold until the companies pay back the money they borrow from the government.

"We're asking these firms to take responsibility," Obama said, adding that these guidelines are only the beginning of a long-term effort that will include a look at broader reform. "We all have to pull together and take our share of responsibility. That's true here in Washington. That's true on Wall Street. The American people expect and demand we will pursue policies...that will prevent these kinds of crises from happening again in the future."

Obama and Geithner did not take questions after the press conference.

Given that this audience includes many CEOs of struggling A/E firms, although many of you don't earn $500K and aren't receiving federal bailout money, I'm interested in knowing what you think of this plan. Do you like the idea that more salary should be tied up in stock as opposed to an annual salary? Are you OK with the idea of not being able to unload the stock unless the debt is repaid? Drop me an e-mail at ehannan@psmj.com.

Ed