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The Recovery Continues

The construction market is still down. And therefore, so is the architecture market. Or at least that's what the conventional wisdom is these days. But is it true?

The construction market is still down. And therefore, so is the architecture market. Or at least that's what the conventional wisdom is these days. But is it true?

For the most part, of course, it is true. But there are significant signs of recovery in both of these markets, recovery that may just be on the cusp of making an impact on our segment of the economy. Two new surveys point to an upturn in construction in the next year, providing a ray of sunshine in what has been a dreary couple of years.

The American Institute of Architects recently reported that its Architecture Billings Index, a monthly survey that asks 700 architecture firms if their billings were higher or lower than the month before, rose from 48.2 in August to 50.4 in September, the first time it was above the breakeven 50 level since January 2008. The commercial / industrial category broke 50 for the fifth-straight month, at 56.3; institutional, 47.9; multi-family residential, 47.0; and mixed practice, 44.2.

A quarterly survey of 73 corporate economists recently released by the National Association for Business Economics (NABE) "'confirms that the U.S. recovery from the Great Recession continues, with business conditions improving,' said [survey committee chair] William Strauss [of the] Federal Reserve Bank of Chicago. 'Industry demand, profits, costs, employment and capital spending strengthened compared to results in the July 2010 survey.'"

Of the 50 respondents to a question about plans for spending on structures, 12 said they expect their firms to increase spending over the next 12 months, while 11 expect a decrease-the first net positive response to the question in more than two years.

That's great news for architecture firms searching for projects, but the real influx of new construction and architecture can only be achieved through significant increases in funding, and the banks don't appear ready to loosen up just yet. But there may be hope inprojects funded directly by U.S. companies.

According to a recent report from Moody's Investors Service, U.S. companies are hoarding almost $1 trillion in cash but are unlikely to spend on expanding their business and hiring new employees due to continuing uncertainty about the strength of the economy.

Reuters reports that companies cut costs, reduced investment in plants and equipment and downsized operations in order to boost cash holdings during the recession. Nonfinancial U.S. companies are sitting on $943 billion of cash and short-term investments, as of mid-year 2010, compared with $775 billion at the end of 2008, according to Moody's.

It appears these companies are looking for greater certainty about the economy and signs of a permanent increase in sales before they part with their cash, but if we are truly making our way out of the recession, an influx of that cash into the market will likely have an effect on the metal construction and architecture industries.

The only question is, when?

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