ABI Index Does Well in Crucial Month

WASHINGTON, DC-The Architecture Billings Index stayed in positive territory for the fifth consecutive month in March, marking a crucial turning point, at least in American Institute of Architects’ chief economist Kermit Baker’s eyes. “This is the fifth month in a row the index has been above 50,” he tells GlobeSt.com. “In December, January and February, those scores could have been attributed to seasonable factors or perhaps the warmer than expected winter weather, which boosted activity.”

Further, the March ABI score of 50.4 also suggests that the improvement is sustainable. Granted, Baker says, these scores are barely registering in positive territory, with 50 being the delineating mark between positive and negative activity. For true confirmation of an upward trajectory, Baker is waiting for April. “Then we’ll know we have moved beyond seasonal factors,” he says.

A leading economic indicator of construction activity, the ABI reflects the approximate nine-to-12-month lag between architecture billings and construction spending. The ABI has sucker-punched the industry before, namely in spring 2011 when it appeared to take an upward turn. All the more reason, Baker says, to suspend judgment until the index has completed a string of consecutive positive months this year. One worrisome note in the March report: the new projects inquiry index was 56.6, down from 63.4 the previous month.

It is not just the ABI that has been wobbly—the most recent unemployment figures released by the Department of Labor at the beginning of the month were disappointing, with only 120,000 jobs added. They followed a number of months in which jobs added to the economy numbered around 200,000. It is important to remember, though, that a disappointing month isn’t out of the ordinary in an economic recovery, said NAREIT Vice President of Research and Industry Information Calvin Schnure in a video interview posted on REIT.com.

Speaking of the job numbers, he said, the figures were not really a step back. “It‘s just a step sideways saying the economy is taking longer to pick up speed,” he noted. “Each time the economy picks up speed, it gets a little bit stronger, it goes a little bit longer,” he said. “We’re hopeful that the economy is going to continue to pick up speed as we go through this year and next.”