Mar 23 2006
The Architecture Billings Index (ABI), a leading economic indicator of nonresidential construction activity, was positive again in February. The ABI has been positive for seventeen consecutive months and twenty-six out of the last twenty-seven months, after seasonal adjustments. This is the longest stretch that the index has been positive since April 1998 through December 2000. The American Institute of Architects (AIA) reported the February ABI rating was 55.5 (any score above 50 indicates an increase), the same score that was registered in January.
“The fact that we are seeing consistently strong numbers at architecture firms over such a prolonged period without any dips is especially encouraging for the nonresidential construction outlook,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “These figures are following along a similar path as the conditions that led to a very healthy construction sector in the late 1990’s.”
This positive news for the nonresidential construction industry comes on the heels of the index of U.S. homebuilder sentiment falling to its lowest level in three years in March, with rising interest rates and weakening demand for new homes cited as the reasons for the drop. Nonresidential construction can offset some of the emerging weakness in the residential market as existing home sales fell for the fifth straight month in January and the reported slowdown of housing starts in February.
Key February ABI highlights
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Regional index breakdown: Midwest (60.3), South (59.0), Northeast (58.0), West (46.2)
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Sector index breakdown: mixed (61.0), commercial / industrial (54.8), institutional (49.9)
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Billings inquiries index: 63.4, just behind the 64.4 score from January
CIBC World Markets senior industrial multi-industry analyst, Robert P. McCarthy, CFA, said, “In tracking the nonresidential construction market for investment potential in electrical equipment manufacturers, a sound leading indicator like ABI is particularly useful, given that much of the electrical content goes into projects at a very late stage of construction. Lighting fixtures, as one of the last installations in a project, gains significant visibility as a construction recovery takes hold.”