Construction Sectors See a Modest Upturn

Major construction sectors served by architects are seeing healthier conditions. Commercial/industrial firms have reported steady growth in billings since last summer, with the upturn accelerating in recent months.

Commercial/industrial firms have been reporting steady revenue growth since mid-2010, according to Kermit Baker, AIA Chief Economist. An upturn in institutional design activity is just beginning to emerge.

Residential firms, many of which are heavily involved in the design of multifamily facilities, have reported strong gains in recent months. If gains continue into the higher-volume spring months, this trend may be an early sign that a sustainable housing recovery is underway. Finally, institutional firms have recently reported very modest gains, which if sustained, would be the final piece of a broad based nonresidential building recovery.

In spite of weak job growth and only modest economic growth, there are emerging signs of inflation in basic construction commodities. Bureau of Labor Statistics reports that as of January, diesel fuel, steel products, plastic resins and copper have all risen at a double-digit pace over the past 12 months.

Prices for many other construction commodities (such as lumber and plywood) have risen at a high single-digit pace. This is of particular concern given the weakness in the domestic construction markets. However, while much of the increase is being driven by energy costs, inflation in core wholesale prices (net of food and energy) is beginning to accelerate, having risen 6.4 percent at an annual rate in January, the largest monthly increase since the end of 2006.

- Courtesy of AIA