Construction industry indicators trending positive

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Commercial Real estate publisher Globe St.com reports the US economy in 2012 is increasingly shaping up to be a positive one. Labor figures, consumer confidence, manufacturing activity—even supply chain activity—all point to positive momentum. So it goes with indicators in the commercial real estate space as well. Groups like the American Institute of ArchitectsNational Association of Home Builders and the Associated General Contractors of America have reported  positive signs.  Not that the news is uniformly positive—one significant discouraging data point is also part of the mix.

After a series of zigzags, the Architectural Biling Index has hit positive territory for three months in a row.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The December ABI score was 52, the same mark in November. The new projects inquiry index was 64, down just a point from a reading of 65 the previous month.

“We saw nearly identical conditions in November and December of 2010 only to see momentum sputter and billings fall into negative territory as we moved through 2011, so it’s too early to be sure that we are in a full recovery mode,” AIA chief economist Kermit Baker said. “Nevertheless, this is very good news for the design and construction industry and it’s entirely possible conditions will slowly continue to improve as the year progresses.”

The NAHB/Wells Fargo Housing Market Index also marked another month of positive growth, climbing for the fourth consecutive month in January by four points to 25. This is the highest level the index has attained since June of 2007.

“Builder confidence has now risen four months in a row, with the latest uptick being universally represented across every index component and region,” Bob Nielsen, chairman of the National Association of Home Builders, said in a statement. “This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide.”

Developers also received good news from the Associated General Contractors of America. It reported that the amount contractors pay for a range of key construction materials edged down 0.2% in December—although it is still 5.3% higher from a year earlier, according to an analysis of producer price index figures.

Unfortunately, it said, this is a case of two steps forward, one step back. That is because the amount contractors charge to construct projects remained largely flat for the month and is up only between 3.3% and 4.7% for the year.

“Any relief contractors might get from the recent declines in materials prices is being offset by their inability to increase prices for new construction projects,” Ken Simonson, the association’s chief economist, said in a statement. “With overall demand relatively weak and public sector investments in construction declining rapidly, construction remains a buyer’s market.” Read More.

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