by Bill McBride on 12/16/2015 11:31:00 AM
Wednesday, December 16, 2015
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From the AIA: Architecture Billings Index Hits another Bump
As has been the case a few times already this year, the Architecture Billings Index (ABI) dipped in November. 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 November ABI score was 49.3, down from the mark of 53.1 in the previous month. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.6, up just a nudge from a reading of 58.5 the previous month.Click on graph for larger image.
“Since architecture firms continue to report that they are bringing in new projects, this volatility in billings doesn’t seem to reflect any underlying weakness in the construction sector,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Rather, it could reflect the uncertainty of moving ahead with projects given the continued tightness in construction financing and the growing labor shortage problem gripping the entire design and construction industries.”
• Regional averages: South (55.4), West (54.5), Midwest (47.8), Northeast (46.2)
• Sector index breakdown: multi-family residential (53.8), institutional (52.0), commercial / industrial (51.0), mixed practice (47.6)
This graph shows the Architecture Billings Index since 1996. The index was at 49.3 in November, down from 53.1 in October. Anything below 50 indicates contraction in demand for architects' services.
Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
The multi-family residential market was negative for most of the year - suggesting a slowdown or less growth for apartments - but has been positive for the last two months.
According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This index was positive in 8 of the last 12 months, suggesting a further increase in CRE investment over the next 12 months.
Posted by Bill McBride on 12/16/2015 11:31:00 AM