While the outlook for building and construction in Australia remains weak, an air of moderate optimism is taking hold across the Pacific Ocean in the United States.
Granted, overall building activity levels in the US remain subdued, and with expectations of economic growth of no more than two and a half per cent per annum over the next couple of years according to the IMF, nobody is seriously talking about any form of construction boom.
There are signs, however, that current weak conditions are improving somewhat.
With a total 2.356 million houses and multi-residential units having been approved for construction over the three months to July according to US Department of Commerce figures (seasonally adjusted), the pace at which new residential construction work is coming in has picked up.
By way of comparison, only 2,199 housing units were approved in the three months to April (seasonally adjusted), and just 1,884 units were approved in the three months to July last year.
To be sure, this is a long way off the pace set in the years leading up to the GFC, when 2,000-plus units (seasonally adjusted) were being approved every month. But it does mean that the pace at which new work is coming in is increasing, albeit from a low base.
The situation is not so promising in non-residential building, where an apparent recovery in permit values toward the end of last year petered out early in 2012.
Even here, though, there are promising signs. Start with the Architectural Billings Index (ABI), a widely-accepted indicator of likely construction activity levels nine to 12 months in advance. At 48.7, the index remained below the all-important 50.0 level separating increasing architectural billings from decreasing billings in the month of July. It was, however, well above June’s horrible 45.6 figure, meaning that while billings are still in decline, the pace of that decline has eased substantially.
Moreover, with the new projects inquiry index rising from 54.4 to 56.3, the pace at which new architectural work is coming in appears to be picking up.
Because of this, American Institute of Architects (AIA) chief economist Kermit Baker says that as long as overall economic conditions continue to improve, the modest declines in design activity at the moment should ‘shift over to growth’ in coming months.
Baker is not the only commentator adopting a more optimistic tone. Associated Builders and Contractors (ABC) chief economist Anirban Basu says that for the first time in several months, ‘[a] more robust recovery in non-residential construction spending is conceivable.’
Underscoring Basu’s sentiment is a combination of an increase in ABC’s Construction Backlog Indicator (CBI) in the June quarter – which put the national average backlog of work among construction firms at a healthy 7.7 months – along with falls in the prices of raw materials, which Basu says will translate into more attractive pro-formers and make it more likely that a given project will get the go-ahead.
No doubt about it, there is little hope of any form of imminent boom in US construction activity, but a moderate upturn just might be in the cards.