Construction Industry Shows Signs of Recovering

Wednesday, 21 Sep 2011 11:38 AM

 

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A leading indicator of U.S. nonresidential construction activity surprisingly rebounded last month after four months of declines, an architects' trade group said Wednesday.

The architecture billings index jumped to 51.4 last month from 45.1 in July, according the American Institute of Architects. Any reading above 50 indicates rising demand for design services, a predictor of construction spending nine to 12 months in the future.

"Based on the poor economic conditions over the last several months, this turnaround in demand for design services is a surprise," said AIA Chief Economist, Kermit Baker.

A separate index of inquiries for new projects, typically higher than the ABI, rose to 56.9 in August from 53.7.

Architects' clients continue to struggle to find financing for projects, but the August data suggests the U.S. construction industry may have bottomed, the AIA said.

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.

Analysts who cover industrial stocks have called the ABI as important an economic indicator as the monthly industrial data from the Institute for Supply Management.

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.

Companies exposed to the sector include Honeywell International, Tyco International, Ingersoll Rand, Johnson Controls, Eaton, Caterpillar, Deere & Co. and Terex.

European companies such as Siemens AG, Schneider Electric SA and lock maker Assa Abloy are also significant players in the sector.

© 2014 Thomson/Reuters. All rights reserved.

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