by Calculated Risk on 6/18/2008 10:06:00 AM

"[W]e’ve seen a dramatic contraction in design activity in recent months. ... This weakness in design activity can be expected to produce a contraction in [commercial and multifamily] construction sectors later this year and into 2009.”
AIA Chief Economist Kermit Baker, June 18, 2008

From the American Institute of Architects: Architecture Billings Index Drops Two Points

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Following a slight rise in April, the Architecture Billings Index (ABI) fell two points in May, prolonging the downturn in design activity at architecture firms. As a leading economic indicator of construction activity, the ABI shows an approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI rating was 43.4, down from the 45.5 mark in April (any score above 50 indicates an increase in billings). The inquiries for new projects score was 46.5.

“With the exception of the institutional sector – projects like government buildings, schools and hospitals – we’ve seen a dramatic contraction in design activity in recent months,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Right now things are especially hard in the West and in the commercial and multifamily residential sectors. This weakness in design activity can be expected to produce a contraction in these construction sectors later this year and into 2009.”

The key here is that the index fell off a cliff in early 2008, and that there is "an approximate nine to twelve month lag time between architecture billings and construction spending". We should expect weaker non-residential structure investment throughout 2008 and 2009.