Wednesday, July 20, 2011

AIA ABI Index for June 2011 retreats further into negative territory and has now been below 50 for the past three months

According to an article I just read on, the AIA ABI (Architecture Billing) Index reading for June 2011 fell to 46.3.

See Reuter’s release down below…..

I’ll repeat what I said last month ….. that’s bad news for the A/E/C Industry, and that’s bad news for reprographers.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So this suggests another dip in CRE (commercial real estate) investment towards the end of this year - and into 2012.

AIA ABI Index, recent “readings”:

46.3 – June 2011

47.2 – May 2011

47.6 – April 2011

50.5 – March 2011

50.6 – February 2011

50.0 – January 2011

54.2 – December 2010

52.0 – November 2010

48.7 – October 2010

50.4 – September 2010

Prior to September 2010, the ABI Index had not been at 50 or above since December 2007.


Wed Jul 20, 2011 8:29am EDT

* June ABI 46.3 vs. May 47.2

* Project inquiries index rises to 58.1

* Institutional sector weakest amid tight govt. budgets

* Analyst: Construction recovery in 2012 or later (Adds analyst comment)

NEW YORK, July 20 (Reuters) - A leading indicator of U.S. non-residential construction activity fell for the third consecutive month in June, suggesting an anticipated construction recovery was still several months away.

The Architecture Billings Index fell 0.9 point to 46.3 points in June, according the American Institute of Architects (AIA). Any reading below 50 indicates contraction in demand for architects' services, whose revenue predicts construction activity nine to 12 months in the future.

A separate index of project inquiries rose, however, to 58.1 from 52.6 in May. This measure is typically higher as multiple architecture firms compete for the same work.

"While a modest turnaround appeared to be on the way earlier in the year, the overall concern about both domestic and global economies is seeping into design and construction industry and adding yet another element that is preventing recovery," AIA chief economist Kermit Baker said.

Demand is weakest in the institutional sector that includes government buildings, reflecting depressed government budgets, according to the monthly survey of architecture firms.

"The threat of the federal government failing to resolve the debt ceiling issue is leading to higher borrowing rates for real estate projects," Baker said. "Should there actually be a default, we are likely looking at a catastrophic situation for a sector that accounts for more than 10 percent of overall GDP."

Commercial property values fell to new lows in April and office vacancy rates are well above pre-recession lows, JPMorgan analyst Ann Duignan said in a note to clients.

"The recovery has yet to find solid ground and that the non-residential construction environment remains challenging," she said. "We believe it is more likely that non-residential construction will not recover until 2012+."

A depressed construction market has been a headwind for manufacturers of construction machinery and components that make up buildings' infrastructure, such as electrical, cooling and security systems.

Most diversified industrial companies get at least some revenue from the non-residential construction sector, which includes office buildings, retail and warehouse space, and institutional buildings such as schools and hospitals.

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