Building Activity Indicators

What Are Building Activity Indicators?

Building activity indicators are economic reports or indexes that furnish analysts and investors with data about the present and projected level of demand for residential, commercial, and industrial construction.

Commercial and industrial building activity incorporates the construction of lodgings, office buildings, multi-family homes, schools, clinics, and other institutional buildings. Residential activity incorporates new housing permits for single-family homes or multi-unit abodes.

Grasping Building Activity Indicators

Building activity indicators give critical bits of knowledge about the soundness of the broad economy, generally in light of the fact that the level of construction activity assumes such a key part in how the overall economy performs. As a matter of fact, construction spending accounts for around 4% percent of the overall U.S. economy at whatever year, as measured by gross domestic product (GDP).

Assuming businesses are investing in new construction, it normally flags that economic growth is strong or on the road to recovery. Then again, weak building activity might mean something bad for the economy

Building activity indicators are statistics that monitor such data as building permits issued, construction of buildings during a specific period, construction spending, the number of construction workers, and, surprisingly, the number of buildings wrecked. These data points might give significant experiences about where the economy is going, essentially during the short term.

Another generally welcomed feature of business activity indicators is their timeliness. Most are distributed month to month, giving users a leap on the more broad quarterly economic measures like gross domestic product, or GDP.

There are numerous checks of building activity. A few indicators are issued by the federal or state legislatures, while others are distributed by construction industry associations and agencies. One famous measure is the Architecture Billings Index. This leading economic indicator surveys architecture firms about whether their billing activity increased, declined, or stayed flat in the previous month. Trends in architecture billings can frequently uncover what is probably going to occur with spending levels on construction nine to 12 months later.

Other well known indicators of building activity incorporate the U.S. Census Bureau's New Residential Construction Index and its New Residential Sales Index.

A few Popular Indicators

There are several indicators of building activity:

New housing starts: The number of new residential construction extends that start during a specific month.
New home sales: Measures sales of recently constructed homes.
Pending home sales: The Pending Home Sales Index (PHSI) is an index made by the National Association of REALTORS (NAR) that tracks home sales where a contract is marked, yet the transaction has not yet closed.
Building Billings Index: A leading economic indicator of demand for non-residential construction activity.
Construction spending: Measures the amount of spending on new construction.
NAHB/Wells Fargo Housing Market Index: Based on a month to month survey of individuals having a place with the National Association of Home Builders (NAHB).
U.S. Census New Residential Construction and Sales Indices: The U.S. Census Bureau puts out a month to month report on new domestic construction spending activity, by dollar value, in the country. The report gives a breakdown of residential and nonresidential spending, as well as by private and public spending.

While an important housing market indicator, measures of existing home sales don't illuminate us about new construction activity.

Instance of Building Activity

To show how the strength of building activity indicators will in general mirror the condition of the U.S. economy, the following are several historical models utilizing construction-related data.

For example, in May 2018 U.S. housing starts, which measure the number of new residential construction projects that have started in a given month, arrived at a 11-year high at that point. Likewise, in May of that year, construction spending hit its highest point since January 2016. In the mean time, the Architectural Billings Index scored 52.8 in May; any score over 50 shows an increase in billings.

So was the overall U.S. economy strong in May, repeating the robust performance of the building activity indicators above? Indeed, however it's important to keep as a main priority that these are monthly indicators. In the previous month, April 2018, many building activity indicators were negative. Try not to just utilize one month to check the bearing of the economy. Follow the trend, while keeping as a top priority that past performance isn't generally an indicator of future outcomes.

Highlights

Construction spending makes up a decent portion of U.S. GDP, thus analysts and investors the same pay consideration regarding these figures as leading or lagging indicators.
Well known indicators including the pending home sales index, construction spending, and the NAHB housing market index.
Building activity indicators measure and track activity or prices connected with residential and commercial construction.