U.S. Commercial Construction Continues to Tumble

A leading indicator of nonresidential construction in the United States fell for a fourth consecutive month in July, in a sign that demand for offices and other commercial properties is weakening.

The monthly Architecture Billings Index (ABI) fell to 45.1 last month, a 1.2-point drop that was its steepest since February 2010, the American Institute of Architects announced on Wednesday. Any reading below 50 indicates a contraction in billings by architects, whose revenue projects construction activity over the next six to nine months.

“Business conditions for architecture firms have turned down sharply,” AIA Chief Economist Kermit Baker said in a statement. “Late last year and in the first couple of months of this year there was a sense that we were slowly pulling out of the downturn, but now the concern is that we haven’t yet reached the bottom of the cycle. Current high levels of uncertainly in the economy don’t point to an immediate turnaround.”

By region, the Midwest was weakest, while the South was strongest. By sector, demand was weakest for multifamily residential buildings and strongest for commercial and industrial sites.

“The steep decline in the ABI since February suggests that the nonresidential construction recovery struggles to gain traction,” Ann Duignan, an analyst with J.P. Morgan, told Reuters. Duignan forecasted the sector may not recover until next year or later.

Weak construction activity for both commercial properties and homes has depressed demand for building components including elevators, air conditioners and electrical systems as well as contributing to high unemployment in the construction trades.

Also announced on Wednesday, the Security Industry Association (SIA) said business confidence among members of the security industry dipped slightly in the second quarter of 2011. Still, according to SIA’s Quarterly Research Update, security industry executives remain optimistic moving forward. About three in four surveyed expect “things will be a little better or much better” in the next three months, while 80 percent say “things will improve or remain the same” during the next 12 months.

Among findings reported in SIA’s market update:

  • There is a growing comfort between law enforcement and security, according to SSI‘s 2011 Law Enforcement Security Industry Study
  • Shipments of electronic products with embedded wireless local area networking technology (WLAN) will surpass one billion units for the first time ever this year and then rise to more than two billion in 2015
  • Smart phones will grow strongly and include security and home automation applications, outstripping home area network applications

The report also cites the intrusion sector is beginning to improve after a sharp decline in 2009 and difficult performance in 2010, while intrusion products globally are poised to recover steadily as the industry capitalizes on new growth opportunities.


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