One theme for 2014 on which we've been very bullish in Action Alerts PLUS has been the expected recovery in the non-residential construction market.
Thus far, this area has badly lagged the recovering residential market, and we watch the monthly Architectural Billings Index on a regular basis as a gauge on a potential pick-up in activity. The ABI is a leading indicator for non-residential construction demand, and it carries a nine-to-12-month lag between billings and the actual pick-up in construction. Well, in January the ABI rose back above the 50 expansionary figure to 50.4 vs. last month's 48.6. In addition, it has now seen expansion in 15 out of the last 18 months.
Since it's a volatile series, we usually look at the ABI's three-month moving average. That currently stands at just under 50 due to softness in both November and December -- but 49.6 is still a solid number, and the six-month average is 51.3. December's six-month mean had been 51.8.
Meanwhile, January's new-projects-inquiries index is 58.5, and the three-month average stands at 58.7.
By region, billings in the West and South have been the strongest of late, having registered above 50 for four consecutive months. That's been offset by weakness in the North and Midwest, whose results have likely been impacted by weather: Both regions have come in below 50 for the last three months.
Overall, the news constitutes another piece of evidence that the non-residential market is poised for improvement.