What’s next in the construction economy? A leading indicator provides one glimpse into the economy’s direction
The US Total Nonresidential Building activity reported by ConstructConnect for the first five months of 2024 posted an 8.4% decline compared to the same period one year ago. Total Nonresidential Building activity includes commercial, industrial, and institutional construction starts. The expansion of heavy engineering over the past 18 months has helped to significantly offset lackluster construction activity elsewhere.
Chief Economist Michael Guckes noted that the Nonresidential Building results align with recent readings from the Architectural Billing Index (ABI). The American Institute of Architects (AIA), the developer of the ABI, states that it provides “a glimpse into the future of nonresidential construction spending activity.”
Considered a leading economic indicator of nonresidential construction activity, the ABI measures the change in the number of services architecture firms provide clients. The AIA and Deltek publish the Architectural Billing Index monthly. (Roper Technologies, which owns Deltek, also owns ConstructConnect.)
Construction industry leaders must make forward-looking decisions, the outcomes of which are highly dependent upon the future state of the construction industry. Leading indicators are valuable for those who must make such decisions. In the residential housing market, for instance, rising mortgage applications and existing home sales may serve as leading indicators of a future rise in new home sales.
The chart below shows the relationship between Nonresidential Building starts and the ABI. Guckes said, “Looking at the latest three months of data and comparing it to the same three months a year ago, the trend in Nonresidential Building Starts data closely resembles the trends in the data from the ABI.”
Guckes added that "the economic starts data collectively suggests a nonresidential construction environment in which type of structure and geography are focal considerations for businesses, where volatility and economic softness are apparent."
Find the latest construction starts report and commentary by Economist Michael Guckes in the Construction Economy Snapshot.
At ConstructConnect, our software solutions provide the information that construction professionals need to start every project on a solid foundation. For more than 100 years, our keen insights and market intelligence have empowered commercial firms, building product manufacturers, trade contractors, and architects to make data-driven decisions, streamline preconstruction workflows, and maximize their productivity. Our newest offerings – including our comprehensive, AI-assisted software – help our clients find, bid, and win more projects.
Visit ConstructConnect.com to learn more.