UPDATE 1-Architecture billings index steady in April-AIA

* Billings index down 0.9 pts to 42.8

* Project inquiries index rises to 56.8

* Architects still report difficult conditions (Adds analyst comment)

NEW YORK, May 20 (Reuters) - A leading indicator of U.S. nonresidential construction held steady in April amid signs of renewed interest in building projects, driven by U.S. stimulus funding, an architects' trade group said on Wednesday.

The Architecture Billings Index fell 0.9 of a point to 42.8 last month after an eight-point jump in March, according to the American Institute of Architects. The index has not crossed above 50 -- a level that indicates improving demand -- since January 2008.

All four U.S. geographic regions tracked by the group, and all four construction subsectors, remained below 50, but all improved sequentially from March. A measure of inquiries for projects rose slightly to 56.8, reflecting builders' interest in stimulus-funded projects.

The data suggested demand might be returning over several months, rather than pointing to a rapid recovery, the AIA said.

"Too many architects are continuing to report difficult conditions to feel confident that the economic landscape for the construction industry will improve very quickly," AIA Chief Economist Kermit Baker said.

The AIA's Billings Index, which began in 1995, is considered a measure of construction activity nine to 12 months in the future. Nonresidential construction includes commercial and industrial facilities such as hotels and office buildings, as well as schools, hospitals and other institutions.

"With the index indicating a contraction in billings for 15 consecutive months, we expect nonresidential construction weakness to extend into mid-2010," JPMorgan analyst Ann Duignan said in a research note.

But Wednesday's data "give us increased conviction that construction spending should begin to recover at some point in 2010," she added.

Companies that sell to construction markets include diversified manufacturer Honeywell International Inc (HON.N), lighting maker Acuity Brands Inc (AYI.N) and electrical components maker Thomas & Betts Corp (TNB.N), as well as heating and cooling systems makers Ingersoll-Rand Co (IR.N) and Johnson Controls Inc (JCI.N).

Caterpillar Inc (CAT.N), Deere & Co (DE.N), Terex Corp (TEX.N), Illinois Tool Works Inc (ITW.N), Parker-Hannifin Corp. (PH.N) and Eaton Corp (ETN.N) are also exposed to the sector. (Reporting by Nick Zieminski, editing by Maureen Bavdek and Lisa Von Ahn)