Electrical Marketing's Leading Indicators

Architectural Billings Index reflects uncertainty in construction market

Following a two-month soft patch the Architecture Billings Index (ABI) rose almost two full points in July. 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 American Institute of Architects (AIA), Washington, D.C., reported the July ABI score was 47.9 points, up from a reading of 46 points the previous month. This score reflects a continued decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index dropped substantially from 57.7 points to 53.1 points. “Business conditions at design firms remain quite volatile,” said AIA Chief Economist Kermit Baker. “While this recent uptick is encouraging, this state of the industry is likely to persist for a while as we continue to receive a mixed bag of feedback on the condition of the design market from improving to flat to being paralyzed by uncertainty.”

PMI drops for third month in a row

The Purchasing Managers Index dropped 0.7 percent in July to 55.5 points — 4.9 points off its recent high of 6.4 in April. The Institute for Supply Management (ISM), Tempe, Ariz., says any reading above 50 percent indicates that the manufacturing economy is generally expanding.

“Manufacturing continued to grow during July, but at a slightly slower rate than in June,” said Norbert Ore, chair of the ISM's Manufacturing Business Survey Committee.”

Leading Economic Indicators (LEI) say no recession

The Conference Board's (LEI) for the U.S. increased 0.1 percent in July to 109.8, following a 0.3 percent decline in June and a 0.5 percent increase in May. “The indicators point to a slow expansion through the end of the year,” says Ken Goldstein, a Conference Board economist. “With inventory rebuilding moderating, the industrial core of the economy has moved to a slower pace. There appears to be no change in the pace of the service sector. Combined, the result is a weak economy with little forward momentum. However, the good news is that the data do not point to a recession.”

The Marketplace : Key Figures

Month Latest month Previous month Month-over-month % change Year-ago Year over-year % change 2009 annual CONSTRUCTION New Construction Put in Place (Billions of dollars, SAAR)² Total JUN 836.01 834.82 0.1 907.75 -7.9 907.63 Offices JUN 24.28 24.54 -1.1 39.46 -38.5 38.05 Industrial JUN 40.93 42.72 -4.2 61.42 -33.4 58.15 Housing Starts JUL 546 537 1.7 587 -7.0 554 Single-unit JUL 432 451 -4.2 500 -13.6 442 Mobile Homes JUN 56 58 -3.4 48 16.7 50 Employment, Construction JUL 5,857 5,784 1.3 6,225 -5.9 6,037 Employment, electrical JUN 756.6 738.8 2.4 800.3 -5.5 795.8 Hourly Wage JUN 25.31 25.31 0 24.87 1.8 24.76 PRODUCTION Industrial Production Index (1967=100)⁵ JUL 93.4 92.5 1.0 86.7 7.7 87.7 Construction Supplies Production Index⁵ JUL 79.6 79.2 0.5 75.4 5.5 75.4 Employment, in Electrical Equipment & Supplies Mfg. Production Workers (Thousands)⁴ JUN 142.4 141.6 0.6 146.3 -2.7 146.7 Weekly Hours JUN 42.3 42.3 0 39.2 7.9 39.6 Hourly Wage JUN 16.23 16.3 -0.4 16.23 0 16.11 Electrical Power Output Index (1967=100)⁵ JUL 103.6 103.5 0.1 94.6 9.5 96.8 Machine Tool Orders* (Millions of dollars)² JUN 228.28 167.08 36.6 116.55 95.9 Industrial Capacity Utilization (Percent, SA)¹ JUL 72.38 71.58 0.8 66.49 5.9 67.04 TRADE Elec. Mfr. Shipments (Millions of dollars)² JUN 3,150 3,110 1.3 2,763 14 — Elec. Mfr. Inventories (Millions of dollars)² JUN 4,639 4,471 3.8 4,427 4.8 4,475 Elec. Mfr. I/S Ratio JUN 1.473 1.438 2.4 1.602 -8.1 1.596 Elec. Mfr. New Orders Millions of dollars)² JUN 3,514 3,229 8.8 2,710 29.7 — Elec. Mfr. Unfilled Orders (Millions of dollars)² JUN 15,386 15,022 2.4 14,128 8.9 14,253 Exports, Electrical Machinery (f.a.s. millions of dollars)² JUN 6,500 6,369 2.1 5,240 24 63,949 U.S. Dollar vs. Other Major Currencies (1973=100)⁵ JUL 103.4 105.2 -1.7 104.6 -1.1 105.6 PRICES & INTEREST RATES Industrial Commodites Wholesale Price Index (Bureau of Labor Statistics, 1967=100) JUL 186.8 186.5 0.2 174.6 7 174.9 Electrical Price Index (Electrical Marketing, 1997=100) JUL 138.1 138 0.1 133.6 3.4 133.1 Construction Materials Wholesale Price Index (Bureau of Labor Statistics, 1982=100) JUL 206.3 206.3 0 201.9 2.2 202.9 Copper Price (Metals Week, cents per pound) AUG 336.63 309.7 8.7 285.03 18.1 239.28 Prime Rate⁵ JUL 3.3 3.3 0 3.3 0 3.3 Federal Funds Rate⁵ JUL 0.2 0.2 0 0.2 0 0.2 Mortgage Rate⁷ JUL 4.6 4.7 -0.2 5.2 -0.7 5 *Several series related to employment are now being reported on a NAICS basis. Because of this change, some numbers are not directly comparable to previously reported data, but are consistent in year-over-year comparisons and comparisons shown in the table.

Sources: ¹McGraw-Hill Construction/Dodge; ²Dept. of Commerce; ³Manufactured Housing Institute; ⁴Dept. of Labor; ⁵Federal Reserve Board; ⁶The Association for Manufacturing Technology; ⁷Federal Home Loan Bank Board. Note: Some figures shown — prime rate, for example — are averaged for month. NYA — not yet available SA-seasonally adjusted. SAAR-seasonally adjusted annual rate. Source for chart: Global Insight. For further information about construction starts, please contact Dodge Analytics at 1-800-591-4462