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Wednesday, August 19, 2009

AIA: Architecture Billings Index shows Contraction in July

by Calculated Risk on 8/19/2009 07:43:00 AM

From Reuters: U.S. architecture billings index up in July: AIA

... The Architecture Billings Index rebounded more than 5 points last month to a reading of 43.1, reversing a similar decline in June, according to the American Institute of Architects.

The index has remained below 50, indicating contraction in demand for design services, since January 2008 ...

Credit remains tight and government stimulus funds have had little visible impact on project activity, AIA Chief Economist Kermit Baker said.

"There has been too much contraction in recent months to get overly optimistic about business conditions," Baker said.
Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions. The AIA's Billings Index, which began in 1995, is considered a measure of construction spending nine to 12 months in the future.
emphasis added
AIA Architecture Billing Index Click on graph for larger image in new window.

This graph shows the Architecture Billings Index since 1996. The index is still below 50 indicating falling demand.

Historically there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on commercial real estate (CRE). This suggests further dramatic declines in CRE investment later this year and next.