Rising orders and increasing optimism from companies like United Technologies Corp and Tyco International point to a strengthening recovery in the US commercial construction market, which has been limping back since bottoming more than three years ago.
The anecdotal evidence, buttressed by a strengthening index of architectural billings that is considered a leading indicator of commercial construction spending, bodes well for a variety of manufacturers whose fortunes are linked to .. The anecdotal evidence, buttressed by a strengthening index of architectural billings that is considered a leading indicator of commercial construction spending, bodes well for a variety of manufacturers whose fortunes are linked to construction spending for everything from hotels and offices to hospitals and schools, which remain far off their peaks from about six years ago.
"Everything that I'm seeing and hearing is that the commercial construction portion of the business is improving," said Mig Dobre, an analyst with Robert W. Baird.
If the rebound is confirmed and sustained, it could be another strong sign that the US economic recovery is entering a more mature phase. Just this week the Federal Reserve gave a more positive assessment of the economy.
Non-residential construction makes up roughly 60 per cent of the nearly $1 trillion in US construction spending.
JP Morgan industrial analyst Stephen Tusa said the second-quarter company reports suggest a recovery for non-residential construction, though he cautioned that it is "choppy and uneven." Tusa estimates that about 15 percent of revenue from the diverse large-cap manufacturers he covers comes directly or indirectly from non-residential construction.
Jeffrey Hammond, an analyst with KeyBanc Capital Markets, also voiced qualified optimism. "No one is shouting from the rooftop that it's robust, but all the directional indicators ... are supportive," he said.
Spurred by his belief in a nonresidential construction rebound, Hammond in June upgraded shares of climate-control system manufacturer Lennox International Inc and Watts Water Technologies, which sells products used for plumbing and water quality.
Read more from The Economic Times