Things go up, things go down...The AIA ABI figures for March 2014 were just posted and the nationwide number fell to 48.8, down from 50.7 in February. This is a pretty sharp fall, but like anything, the devil is in the details and I'll get to that soon. But, as any value greater than 50 means that architecture billings are increasing (and conversely, any value less than 50 means billings are decreasing), a fall from 50.7 to 48.8 is not good news. Architectural billings are a nine to 12 month leading indicator for construction activity. But most of the damage is in certain regions, which are shown below:
Regional Averages for March 2014:
The west continues to be strong, but as mentioned last month, the strength is concentrated in major metropolitan areas (San Francisco/San Jose is still very hot). This shows that even within large regions, there are pockets of strength AND weakness.
Sector Averages for March 2014:
The multi-family residential market continues to pace building construction, which has been an on-going trend. Yet, the slight decline will be worth watching. The decrease in commercial/industrial is also worthy of attention, as the recent drop is mildly troubling.
One bright spot in the new data: project inquiries increased to 57.9 from 56.8 in February.
The U.S. Department of Commerce's Census Bureau reported yesterday that construction spending for February increased 0.1% to $945.7 billion above January's revised value of $944.6 billion. Increases were seen in private construction ($680 billion in February, up from $679.1 billion in January) and public construction ($265.7 billion in February, up from $265.5 billion in January). Those gains might seem small, but they're month-to-month increases. The real story is in year-to-year growth. On that basis, private residential construction is up 14% and non-residential is up 12%. Public construction is still weak and down about 2% year-over-year. The figures below from Bill McBride at the Calculated Risk blog do a great job of showing how we're still way off from the bubbly highs of the mid 2000s but up strongly from the bottoms at the beginning of the 2010s.
I agree with Bill in that these gains in construction, along with the increases in the AIA's Architectural Billing Index, shows that the construction industry is getting stronger. The ABI is increasing for commercial construction (read about it here) and will continue to improve as more people find employment and spend money. Private residential tends to lead the economy, so strength in that segment is good news.