Economic Indicators: Muddying the Waters

Earlier today, I wrote about how the AIA ABI is showing continues strength in the multi-family commercial construction segment, but also how the commercial/Industrial segment is improving as well. Not a few hours later did I come across the following article stating that non-residential starts are down for the third month in a row. Some of the data from that article is displayed below:

So what gives? My take is that the AIA ABI is a leading indicator which typically predicts construction activity nine to 12 months in advance (it's a measure of architectural billings, which occur well in advance of actual construction), while construction starts are a more contemporaneous measure of construction activities (usually within the past month or so). The winter was particularly brutal on the east coast and midwest, so construction starts were slowed, but that bad weather may not have had the same negative effect on architectural billings. In sum, it will take a while to know exactly how the economy is doing, but hopefully ABI (forward looking) trumps starts (backwards looking) as a predictive indicator of the health of the construction industry.