Electrical Marketing’s Leading Economic Indicators - April 2016

April 22, 2016
Building permits sank in March, but the Purchasing Manager's Index and architectural billings are looking better.

Building permits sink 7.7% in March. Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,086,000, 7.7% below the revised February rate of 1,177,000, but 4.6% above the March 2015 estimate of 1,038,000. Single-family authorizations in March were at a rate of 727,000, 1.2% below the revised February figure of 736,000.

“While this report is discouraging as we enter into the spring selling season, one month does not make a trend,” said Kristin Reynolds, U.S. economist, IHS Global Insight in a press statement. “Homebuilder optimism has been moving sideways for three months in a row, but the headline index remains ahead of year-earlier levels.”

Purchasing managers feeling more optimistic in March report. The Institute for Supply Management (ISM), Tempe, Ariz., reported that the March Purchasing Managers Index (PMI) registered 51.8%, an increase of 2.3 percentage points from the February reading of 49.5%. The New Orders Index registered 58.3%, an increase of 6.8 percentage points from the February reading of 51.5%.

AIA’s Architecture Billings Index continues positive move in March. The American Institute of Architects (AIA) reported the March ABI score was 51.9, up from the mark of 50.3 in the previous month. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.1, down from a reading of 59.5 the previous month.

As a leading economic indicator of construction activity, the ABI reflects the approximate nine- to twelve-month lead time between architecture billings and construction spending.

“The first quarter was somewhat disappointing in terms of the growth of design activity, but fortunately expanded a bit entering the traditionally busy spring season. The Midwest is lagging behind the other regions, but otherwise business conditions are generally healthy across the country,” said AIA Chief Economist, Kermit Baker. “As the institutional market has cooled somewhat after a surge in design activity a year ago, the multi-family sector is reaccelerating at a healthy pace.”