I like to think I'm reasonably up to date on what key economic indicators a knowledgeable person should be following, but it seems like there's always yet another hitherto-unknown-to-me compilation of data points lurking in the shadows.
Today, it's the Architecture Billings Index (ABI), brought to us by the venerable American Institute of Architects (AIA). (Thanks to Calculated Risk for the tip.) Based on a monthly survey sent out to AIA member-owned firms, the ABI measures whether billings are increasing or decreasing. The significance? Historically speaking, nine to twelve months after the ABI starts dipping, non-residential commercial construction activity takes a hit.
So guess what? The ABI plunged in February, to its lowest point since 2001. (The ABI only dates back to 1995, which means the bad old days of the 1991-2 recession are not included.) A chart tracking the ABI over the last ten years is eerily familiar to many other recently published snapshots of economic activity tied to the housing industry. Starting in 1996 it meanders about for a few years, dropping to its historical low during the 2001 recession. Then it gradually rises until it falls off a cliff.
The significance of this index is worth pondering for anyone who has been cheered by the so-far-reasonably-successful efforts by Ben Bernanke and Hank Paulson to stabilize financial markets. No matter how comfortable the Fed tries to make Wall Stret, the real economy is inexorably headed south. Commercial construction has long been reasonably immune from the housing bust that savaged residential real estate, providing a cushion for construction employment and business for construction companies and design firms.
But not for very much longer.