Tuesday, March 13, 2012

ABI Increases Modestly for Third Consecutive Month

The American Institute Architects’ Architecture Billings Index increased for the third month in a row in January. This trend is very similar to that of a year ago, when billings moved up in the fourth quarter of 2010 and remained positive through the first quarter of 2011. Gains were seen in almost all regions, and business has improved across all firm specializations.

The Architecture Billings Index (ABI) serves as the leading economic indicator of construction activity, and reflects the approximate 9-12 month lag time between architecture billings, and actual construction spending. The monthly ABI scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline.

The ABI registered a score of 50.9 in January. This is the third consecutive month of growth, and a positive sign that the industry will improve in 2012. With the exception of the hard-hit west, which recorded an ABI score of 45.6, billings in all regions showed growth. Firms in the Midwest have recorded the second consecutive month of growth with an ABI score above 53, while the South and Northeast recorded scores of just above 50.

Firms specializing in residential, commercial/industrial, and institutional projects all registered gains, while mixed-practice firms (ones without a majority of their billings in any single major construction sector) were still contracting. The residential sector has been relatively strong for the last five months, reflecting emerging strength in multifamily rental housing. The commercial/industrial sector has been consistently positive; showing gains in each of the last five months, and maintaining scores close to 50 since April 2010. The ABI stands at 52.2 for this sector, indicating reasonable growth.

More mixed signs

The economy created nearly a quarter million jobs in January, according to the Bureau of Labor Statistics. There have been two straight months of job gains above the 200,000 mark, and in January the unemployment rate dropped to a three-year low of 8.3%. Architectural services industry employment numbers remained stable in 2011, with less than a 1% decrease from the previous year (2010 saw an 11% decline from 2009). Payrolls reached a peak in 2008, with 220,500 employed, but this number has fallen to 153,300 with the most recent report. In contrast, the construction employment picture has shown some modest gains over the past year.

After rising for five straight months, confidence among U.S. consumers declined in February, as growing optimism about job prospects failed to ease concerns that wages will stagnate. The Thomson Reuters/University of Michigan index of consumer sentiment dropped to a preliminary reading of 72.5 for the month. Furthermore, a 22% increase in the price of gasoline is pinching household finances, and serving as a reminder that the pickup in hiring has yet to boost incomes.


By region, the ABI breaks down as follows from November to December: Midwest is up 53.7 from 53.1, South is down 51.6 from 54.2, Northeast is up 50.7 from 52.6, and West is up 45.6 from 45.1

By market sector: Residential is down 52.6 from 54.3, Commercial/Industrial is down 52.2 from 54.1, and Institutional is down 51.1 from 51.3.

This month, Work-on-the-Boards participants are saying:

• Much of the work in this area is close to starting in construction or is under construction now. New projects seem to be stalling because of indecision.
—Large firm in the Midwest, commercial/industrial specialization

• Currently work remains slow, but there appears [to be the] start of a turnaround. Warm weather has helped.
—Small firm in the Northeast, mixed specialization

• Business has improved dramatically, to the point that we have hired three new people in the last month. The biggest increase has been in healthcare/hospital work.
—Midsized firm in the South, institutional specialization

• There seems to be some sort of a thaw relating to new projects and inquiries. As for inquiries, December and January showed very positive signs. We hope this is representative of the year to come.
—Small firm in the West, residential specialization

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