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ABI Hits First Positive Territory in Three Months

by Chicago Agent

A forward-thinking index return to positive territory yesterday, indicating a brighter future for construction.

After a nearly three-point jump in October, the Architecture Billings Index, a forward-thinking measure of future construction activity, increased by 2.6 in November to 52.0, the first positive level for the index since August. Additionally, the new projects inquiry, a separate segment of the index, dramatically rose by 7.7 to 65.0.

A representation of architectural activity, the ABI operates on a nine to 12 month lag between architecture billings and construction spending. Any index more than 50 represents an increase in billings.

Kermit Baker, the chief economist for the American Institute of Architects, the organization that releases the ABI, said though he is pleasantly surprised by the index, he is holding out for more sustained positive numbers.

“This is a heartening development for the design and construction industry that only a few years ago accounted for nearly ten percent of overall GDP but has fallen to slightly less than six percent,” Baker said. “Hopefully, this uptick in billings is a sign that a recovery phase is in the works. However, given the volatility that we’ve seen nationally and internationally recently, we’ll need to see several more months of positive readings before we’ll have much confidence that the U.S. construction recession is ending.”

Regionally, the South led the way with a 54.4 rating, with the Midwest in second at 50.9. Regarding the various sectors of construction, multifamily residential properties were far ahead with a 55.8 rating, yet another strong indicator of the multifamily property’s ascendence in today’s market. As we just reported yesterday, multifamily starts were up 60 percent in 2011, and based on the long-term projections of the ABI, it would appear that more are to come.

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