According to Reuters, “A leading indicator of nonresidential construction in the United States, [the American Institute of Architects Billings Index,] fell for a fourth straight month in July, in a sign that demand for offices and other commercial properties is weakening.”
That is not a good sign for the shrinking backlogs of construction companies around the country and might point to a really tough next 6 months and even into 2012.
The index dropped to 45.1, and since anything under 50 speaks to a weakening economy, we may be looking at more consolidations and mergers in both the design and construction firms around the country.
The billings index usually leads the construction indexes by 12 months or so, those pundits who are predicting a double dip might be on point. That is not a good sign for the industry where low bid in the current norm and the unemployment rate in the industry is around 19%.
According to Kermit Baker, the group’s chief economist, “By region, the Midwest was weakest, while the South was strongest. By sector, demand was weakest for multifamily residential buildings and strongest for commercial and industrial sites.”
We once compared the economy to the Mighty Mississippi River and said that we thought that we were in the bottom of the river and that we were unsure of how wide it was and when the economy would turn up again. Well, it looks like the river is mighty wide and muddy and we are on the bottom of that river right now.
If the Architecture Billings Index (ABI) is correct, then 2012, with the exception of a few major projects, will be really tough for us.
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