by Bill McBride on 9/21/2016 09:57:00 AM
Wednesday, September 21, 2016
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From the AIA: Architecture Billings Index slips, overall outlook remains positive
On the heels of six out of seven months of increasing levels of demand for design services, the Architecture Billings Index (ABI) fell just below the positive mark. 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 August ABI score was 49.7, down from the mark of 51.5 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 61.8, up sharply from a reading of 57.5 the previous month.Note that multi-family is positive again, so we might see another pickup in multi-family starts.
“This is only the second month this year where demand for architectural services has declined and it is only by a fraction of a point,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Given the solid numbers for new design contracts and project inquiries, it doesn’t appear that this is the beginning of a broader downturn in the design and construction industry.”
• Regional averages: South (55.2), Midwest (52.8), West (49.0), Northeast (44.9)
• Sector index breakdown: mixed practice (51.8), multi-family residential (50.9), commercial / industrial (50.8), institutional (50.7)
Click on graph for larger image.
This graph shows the Architecture Billings Index since 1996. The index was at 49.7 in August, down from 51.5 in July. Anything above 50 indicates expansion 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.
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 9 of the last 12 months, suggesting a further increase in CRE investment through mid-2017.
Posted by Bill McBride on 9/21/2016 09:57:00 AM