Wednesday, March 18, 2009

Architecture Billings Index Near Record Low

by Calculated Risk on 3/18/2009 09:14:00 AM

The American Institute of Architects reports: Architecture Billings Index Continues to Point to Difficult Conditions

A second headline reads: "No region or building sector immune from prolonged economic downturn"

AIA Architecture Billing Index Click on graph for larger image in new window.

Following another historic low score in January, the Architecture Billings Index (ABI) was up two points in February. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI rating was 35.3, up from the 33.3 mark in January, but still pointing to a general lack of demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score was 49.5.

“Despite a higher score than last month, we are likely to see light demand for new construction projects through much of the year,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “There is hope that the stimulus bill will result in more project activity, but that is also dependent on banks easing lending standards in the months ahead. Still, the improvement in the inquiries index does provide hope that some stalled projects will resurface in the near future.”
Note that historically there is an "approximate nine to twelve month lag time between architecture billings and construction spending". The ABI fell off a cliff in early 2008 and that decline started showing up in non-residential construction spending in Q4.

The ABI fell off a 2nd cliff in late 2008, and that will show up mid-2009.

Since the index is still well below 50 (anything below 50 means contraction in billings), this suggests non-residential investment in structures will decline all year (no surprise!).