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Wednesday, August 22, 2012

AIA: Architecture Billings Index Downturn Moderates as Negative Conditions Continue in July

by Calculated Risk on 8/22/2012 04:02:00 PM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Architecture Billings Index Downturn Moderates as Negative Conditions Continue

The Architecture Billings Index (ABI) pointed to a slower decline in July in design activity at U.S. architecture firms. 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 July ABI score was 48.7, up considerably from the mark of 45.9 in June. This score reflects a decrease in demand for design services (any score below50 indicates a decline in billings). The new projects inquiry index was 56.3, up from mark of 54.4 the previous month.

“Even though architecture firm billings nationally were down again in July, the downturn moderated substantially,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “As long as overall economic conditions continue to show improvement, modest declines should shift over to growth in design activity over the coming months.”
AIA Architecture Billing Index Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 48.7 in July, up from 45.9 in June. 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.

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 suggests further weakness in CRE investment later this year and into next year (it will be some time before investment in offices and malls increases).

Earlier on existing home sales:
Existing Home Sales in July: 4.47 million SAAR, 6.4 months of supply
Existing Home Sales: Inventory and NSA Sales Graph
Existing Home Sales graphs