U.S. construction activity indicator sinks-AIA

NEW YORK, March 19 (Reuters) - The deteriorating housing market and sluggish economy slammed U.S. commercial construction in February, according to an architect trade group's leading indicator of nonresidential building activity released on Wednesday.

The American Institute of Architects' Architecture Billings Index tumbled to 41.8 for the month, its lowest level since October 2001, and down from 50.7 in January, the second consecutive monthly decline.

Any score below 50 shows a decrease in billings, a measure of time and effort spent on a project.

"This is a clear indication that there could be tougher times ahead for design firms and a noticeable slowdown in commercial construction projects coming online in the foreseeable future," said AIA Chief Economist Kermit Baker in a statement.

The ABI reflects a nine-months-to-a-year lag time between architecture billings and construction spending, making it a leading indicator of construction activity.

Regionally, the weakest reading was in the Midwest, where the index stood at 42.6, while demand was strongest in the Northeast, with a reading of 51.5.

Nonresidential building has held up relatively well over the past two years, even as the U.S. housing market has slumped. Still, executives at some companies that sell into the nonresidential construction market, including diversified manufacturer Honeywell International Inc (HON.N), have started to forecast a downturn in that segment as well.

Other companies that generate revenue from nonresidential construction include Cooper Industries Ltd (CBE.N), which makes electrical products and tools, lighting maker Acuity Brands Inc (AYI.N) and and electrical components maker Thomas & Betts Corp (TNB.N).

The rating for the commercial and industrial sector was 40.6, indicating a decrease in billings.

"The one bright spot," Baker said, "continues to be the institution sector with continued positive conditions for construction projects such as schools, hospitals and government buildings."

The ABI rating for the institutional sector was 54.9.

Companies with exposure to this sector include engineering and construction company Fluor Corp (FLR.N), and Johnson Controls Inc (JCI.N), which provides heating, ventilation and cooling systems to institutions. (Reporting by Chelsea Emery; Editing by Brian Moss)