Architecture Billing Index Shows Continued Signs of Expansion


We can add the ABI to the drumbeat of data points that continue to point to economic expansion.

“Davidson” submits:

The employment reports this morning were quite positive. I follow the Household Survey which remains within its trend since July 2011 of gains of ~280,000/mo gaining 296,000 in April 2013. The Establishment Survey reported April 2013 gains of 165,000 and March 2013 revised higher from 88,000 to 138,000 an increase from the previously reported gain of 50,000. The Bureau of Labor Employment Report can be found at this link: BLS Employment Report April 2013

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Capture4107 624x401 Architecture Billing Index Backs Continued Expansion

Construction Employment (part of the Establishment Survey) was reported with an increase of 27,000. At the bottom of this note the March 2013 ABI (Architecture Billing Index) shows steady improvement. The ABI trend which is correlated to future Construction Spending and Construction Employment is reported to subscribers monthly but available quarterly at this link: ABI March 2013 Residential Sector appears strongest but other sectors are rising and still have considerable improvement ahead before we enter economic maturity.

Capture2130 624x418 Architecture Billing Index Backs Continued Expansion

Capture3114 624x388 Architecture Billing Index Backs Continued Expansion

Fundamentals are Directly Correlated to Stock Prices

1. All of the important economic indicators remain in uptrends.

2. Higher Lt Vehicle Sales and higher Household Survey(Emp) lead to higher corporate revenue and profits.

3. Higher Corporate Profits = Higher Stock Prices

The construction cycle remains in early stages. Fulfilling the basic demand for the level of residential and commercial structures required for our ~310mil citizens and the additional infrastructure of roads, sewers, water systems, schools, bridges, hospitals and etc. requires hiring/rehiring millions of people. Historically one can estimate that it is likely to take 5yr-6yrs to work through the pent-up demand of the past 5yrs and many of these individuals will themselves buy vehicles and homes. This has always occurred in the past and has pushed our economy to its upper level of performance in previous cycles.

In my opinion we have some distance to go yet till we need to be more prudent with our equity exposure. Optimism remains (more than a little) warranted.

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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