by Bill McBride on 4/23/2014 11:23:00 AM
Wednesday, April 23, 2014
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From AIA: Architecture Billings Index Mired in Slowdown
Following a modest two-month recovery in the level of demand for design services, the Architecture Billings Index (ABI) again turned negative last month. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 48.8, down sharply from a mark of 50.7 in February. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 57.9, up from the reading of 56.8 the previous month.Click on graph for larger image.
“This protracted softening in demand for design services is a bit of a surprise given the overall strength of the market the last year and a half,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Hopefully, some of this can be attributed to severe weather conditions over this past winter. We will have a better sense if there is a reason for more serious concern over the next couple of months.”
Regional averages: South (52.8),West (50.7), Northeast (46.8), Midwest (46.6) [three month average]
This graph shows the Architecture Billings Index since 1996. The index was at 48.8 in March, down from 50.7 in February. Anything below 50 indicates contraction in demand for architects' services. This index has indicated expansion during 16 of the last 20 months.
Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. Even when positive, this index was not as strong as during the '90s - or during the bubble years of 2004 through 2006 - because the vacancy rates are still high for many CRE sectors. However, the readings over the last year and a half suggest some increase in CRE investment in 2014.
Posted by Bill McBride on 4/23/2014 11:23:00 AM