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Construction Index Surges in November, Points to Healthy Construction in 2007
After consecutive months of very modest growth, the Architecture Billings Index (ABI) saw a considerable jump in November to its second highest reading of the year, according to the American Institute of Architects.
The Architecture Billings Index provides a look six months into the future of nonresidential construction activity and is derived from a monthly “Work-on-the-Boards” survey and produced by the AIA Economics & Market Research Group.
The commercial / industrial sector recorded its best mark of the decade and while still reporting weak billings, residential architecture firms showed encouraging signs by posting the highest score in four months.
"The spike in the ABI this month reflects reinvigorated design activity, now that national elections have concluded and future interest rate policy is clearer," says Matthew A. Litfin, an equity research analyst with William Blair & Company. "The November ABI reading is near record levels last seen in fall 2005 and before that, in mid-1998. Looking ahead to 2007, we are predicting very strong growth in nonresidential construction activity and stabilization in residential construction activity."
With an approximate nine to twelve month lag time between architecture billings and construction spending, the ABI is a leading economic indicator of construction activity, and should translate into a high level of activity throughout 2007. The American Institute of Architects (AIA) reported the November ABI rating was 57.5 up sharply from 51.1 in October Any score above 50 indicates an increase in billings, according to the AIA.
“The nonresidential construction sector continues to see a high level of demand for design services,” says AIA Chief Economist Kermit Baker. “Even though there has been some deceleration in growth the previous two months, an uptick in billings of this size is noteworthy in portending sustained construction activity in the months ahead.”
Key November ABI highlights:
• Regional averages: West (60.7), Northeast (58.0), South (51.1), Midwest (49.5).
• Sector index breakdown: commercial / industrial (62.9), institutional (54.6), mixed (50.6), residential (47.4).
• Inquiries index: 62.1.