Electrical Marketing’s Leading Economic Indicators

July 27, 2012
AIA Billing Index, Dodge Momentum Index and Purchasing Managers Index all point to softening economy.

AIA says architects saw activity drop again last month. The Architecture Billings Index (ABI) published monthly by the American Institute of Architects (AIA), Washington, D.C., saw more poor conditions last month, indicating a drop in design activity at U.S. architecture firms, and suggesting upcoming weakness in spending on nonresidential construction projects. As a leading economic indicator of construction activity, the ABI reflects the approximate nine- to twelve-month lag time between architecture billings and construction spending. The AIA reported the June ABI score was 45.9, nearly identical to the mark of 45.8 in May. This score reflects a decrease in demand for design services (any score above 50 indicates an increase in billings). “The downturn in design activity that began in April and accelerated in May has continued into June, likely extending the weak market conditions we’ve seen in nonresidential building activity,” said AIA Chief Economist, Kermit Baker.

Dodge Momentum Index slips in June. The Dodge Momentum Index retreated 2.3% in June, according to McGraw-Hill Construction. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The Momentum Index for June came in at 92.2 (2000=100), down from May’s revised 94.4. This marked the second monthly decline in a row, following the 0.7% pullback in May. The drop for the Momentum Index during the most recent two months mirrors the recent softening in the U.S. economy, and suggests that the slower pace of economic growth is causing some deceleration in plans for future development.

Purchasing Managers Index drops 3.8 points into contraction territory. The 3.8-point drop in the Purchasing Managers Index (PMI) for June to 49.7% from 53.5% marked the first sign of contraction in the manufacturing sector since July 2009, when the PMI registered 49.2 percent. Comments from the panel range from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China.