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Year-end economic indicators were cautiously optimistic

The market is cautiously trending upwardThe Architecture Billings Index (ABI) is an indicator of construction activity that is based on a survey of firms of members of The American Institute of Architects (AIA). It reflects the approximate 9-12 month lag between architecture billings and construction spending. A score of 50 or more indicates growth and a score below 50 indicates a decline in billings.

The ABI at the end of 2015 was 50.9, which indicates a slight rise in overall billings for design services over the previous month, although it was down from a high in June of more than 55. The December results also indicate that the Northeast and Midwest regions continued to struggle with ratings of 46.7 and 46.1, respectively.

CONFINDEX is another market indicator that measures the confidence of commercial construction CFOs based upon current business and financial conditions and expectations for the coming year. A score of 100 or more indicates optimism among survey participants.

The December CONFINDEX score of 128, while optimistic, was down from the previous two quarters due to concerns about the shortage of skilled workers, expected increases in interest rates, and the possibility of a recession in states that rely heavily on the oil sector.

Lastly, the Commerce Department’s survey of construction spending, which represents work done each month on new structures or improvements to existing structures, reached a level in 2015 for both public and private sectors not seen since the financial crash of 2008. Last year’s spending of $1.097 trillion was 10.5% higher than 2014’s spending of $993.4 billion.

The private sector, which includes new homes and apartments and private non-residential projects, accounted for 70% of all construction spending in 2015. Public construction, including educational and highway construction, also saw an increase, although it was only 5.6% higher than 2014.

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