The national ABI score for May was 53.0, up 2.1 points above April’s score, (> 50 indicates an increase in billings). The ABI has been greater than 50 for four of months in a row and for seven of the last eight months. The new projects inquiry index was 62.4, up 2.2 points month on month.
Three of the four regions of the country reported expanding billings in May. The South recorded the strongest score at 56.1, followed by the West at 52.3 and the Midwest at 50.4. The Northeast reports a 46.5, down 4.2 points m/m and its first score under 50 in six months.
Figure 1 presents a map of the US depicting the four ABI regions. It is color coded to show expanding billings and increased growth in green and declining billings and negative growth in red. The data is shown on this map is as three month moving averages (3MMA), and 3 month year on year (y/y), percent change. On a 3MMA basis, the US ABI was 52.7 with a 1.7% growth y/y. The Southern zone scored the highest 3MMA ABI with 54.7. Its growth rate was 2.1% y/y. The Midwest recorded a 52.8 3MMA ABI and the strongest y/y growth rate at 6.1%. The Northeast posted a 49.9 3MMA ABI, and negative 1.9% y/y growth. The West recorded a 3MMA of 51.1 and negative 0.6% y/y growth rate.
Figure 2 charts the ABI sub-index for commercial / industrial, institutional from 2013 to present. The Commercial/Industrial sub-index jumped 3.4 points to 55.8 in May as the private construction sector continued to gain strength. The Institutional scored a 51.2, its seventh month in a row greater than the 50. New design contracts increased by 1.6 points month on month to post a solid score of 54.8.
Overall the latest ABI report presented good news for the 9 to 12 month outlook for non-residential construction. Quoting AIA Chief Economist, Kermit Baker, Hon. AIA, PhD: “The fact that the data surrounding both new project inquiries and design contracts have remained positive every month this year, while reaching their highest scores for the year, is a good indication that both the architecture and construction sectors will remain healthy for the foreseeable future. This growth hasn’t been an overnight escalation, but rather a steady, stable increase.”
Construction firms continue to express concern of a shortage of qualified tradesman and subcontractors. In a recent article from the Association of General Contractors (AGC), Ken Simonson, the association’s chief economist said: “As a result of tight labor market conditions, many firms are opting to invest more in training, find ways to become more efficient or use new techniques like off-site prefabrication or robotics to reduce labor needs.” The article went on to say that; Construction employment increased in 243 out of 358 metro areas between May 2016 and May 2017, declined in 59 and stagnated in 54, according to a new analysis of federal employment data.
At Gerdau we follow the ABI because it is a leading indicator of non-residential construction activity. The ABI has a proven track record and as such it is useful for business planning purposes.