Thursday, August 20, 2009

CRE: ABI and Nonresidential Structure Investment

by Calculated Risk on 8/20/2009 07:36:00 PM

The American Institute of Architects (AIA) releases the Architecture Billings Index (ABI) monthly, and the AIA chief economist Kermit Baker frequently mentions there is an "approximate nine to twelve month lag time between architecture billings and construction spending."

Architecture Billings Index and Nonresidential Investment Click on graph for larger image in new window.

This graph compares the ABI with the quarterly data on nonresidential construction investment from the Bureau of Economic Analysis.

Although there is only data back to 1996, it appears that after the ABI falls consistently below 50 (contraction of billings on mostly commercial projects), then nonresidential structure investment declines on a YoY basis about one year later.

And YoY investment increases about one year after the ABI surpasses 50.

This suggests that nonresidential structure investment will decline through most of 2010, with no bottom in sight (since the ABI is still well below 50).

Right now I'm expecting another major slump in nonresidential structure investment towards the end of this year (following the ABI slump at the end of 2008), and for nonresidential structure investment to decline throughout 2010.