Rock Bottom of Construction Cycle?

After a series of historic lows, the Architecture Billings Index (ABI) rose more than eight points in March. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to 12-month lag time between architecture billings and construction spending, suggesting the pace of construction activity will likely pick up in coming months. The American Institute of Architects (AIA) reported Wednesday the March index reading was 43.7, up from the 35.3 mark in February, marking the first time since September 2008 that the index was above 40. But the score still indicates an overall decline in demand for design services, the AIA said, as the score must be above 50 to indicate an increase in billings. The new projects inquiry score, however, reached 56.6 in March. “This news should be viewed with cautious optimism,” warns AIA chief economist Kermit Baker. “The fact that inquiries for new projects increased is encouraging, but it will likely be a few months before we see an improvement in overall billings. Architects continue to report a diversity of business conditions, but the majority is still seeing weak activity levels,” he said. Regionally, the South posted the strongest index reading of 43.4, while the West saw the weakest billing activity at 36.1. The Northeast and Midwest recorded index marks of 41.8 and 37.5, respectively. If broken down by sector, the index revealed the strongest billing activity in the mixed practice sector, followed by institutional, multi-family residential, and lastly, the commercial and industrial sector. Write to Kelly Curran at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.