AEC Biz: Many Signs Pointing Up

We’re not out of the woods yet, but many signs are pointing to a decent recovery in AEC this year, from two AIA reports to building data to real estate agent predictions. Here is a synopsis of some key indicators:

AIA Architecture Billings Index

This is the most direct measure of success of the architecture business. The latest number, from August, was 50.2, which indicates minor growth in billings from the previous month. The best progress was in the West, where firms had an index of 51.2, their first monthly increase in five years.

AIA Consensus Construction Forecast

The latest AIA Consensus Construction Forecast, in July, doubled from its January edition, which is definitely good news. The Consensus averages out the forecasts of seven well-respected forecasting organizations, including McGraw-Hill Construction, Moody’s Economy, and Associated Builders and Contractors. Here’s the big number: They expect non-residential construction to grow 4.4 percent in 2012, and 6.2 percent in 2013. That’s nice, solid growth.

The Consensus report reveals, however, that no one really knows for sure what’s going to happen, because the estimates vary widely. For example, McGraw-Hill Construction predicts 1.5 percent growth in non-residential construction this year, while Reed’s Construction Data predicts 5.4 percent growth. That’s a substantial difference in opinion. The good news is that no one is predicting less than 1.5 percent, so we can assume business is growing.

The same diversity of opinion exists for 2013 — the predictions range from 4.2 percent growth (Associated Builders and Contractors) to almost double that, 8.3 percent growth (Moody’s). But everyone sees growth, and more growth in 2013 than in 2012.

FRED Building Starts Data

The St. Louis Federal Reserve Bank publishes data on housing starts as measured by building permits as part of its Federal Reserve Economic Data (FRED) reports. The FRED data show that housing starts are up in many parts of the country. In the West Region, for example, 197,000 housing units were started in July 2012, compared to 133,000 in July 2011. The story’s not quite as nice in the Northeast — 77,000 this July compared to 86,000 last July. But for the last 12 months, even the Northeast is up, 878,000 versus 837,000 (and versus 815,000 in the 12-month period ending July 2010).

Not all the indicators are positive, unfortunately. Besides the ones we all see in the news every day — persistent unemployment, high fuel prices, stock prices driven by lemming-like behavior — are these unfavorable items:

New home sales dropped in June by 8.4 percent over the month prior, according to the Commerce Department. Most of this came in the Northeast, where sales dropped 60 percent. “Housing will continue to recover gradually throughout the year but fundamentals are not supportive of a fully fledged housing market recovery,” said Yelena Shulyatyeva, an economist at BNP Paribas, quoted in an article from Reuters.

Manufacturing activity in the U.S. Atlantic region shrank in August, according to the Philadelphia Federal Reserve Bank. “Overall, they (the data) are consistent with our outlook that growth will be a little bit better in the U.S. but not as upbeat as some people think,” said Brian Kim, a currency strategist at RBS Securities in Stamford, Connecticut, in a Reuters article.

So these mixed messages mean there’s still a long road to recovery, but at least relief seems to be on the way.

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