by Calculated Risk on 3/19/2008 09:48:00 AM

From the American Institute of Architects: Architecture Billings Index Points to Major Downturn in Commercial Construction

Click on graph for larger image.

Added graph of index (hat tip smalltown guy)

[T]he Architecture Billings Index (ABI) tumbled almost nine points in February. 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 February ABI rating fell to 41.8, its lowest level since October 2001, and down dramatically from the 50.7 mark in January.
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"This is a clear indication that there could be tougher times ahead for design firms and a noticeable slowdown in commercial construction projects coming online in the foreseeable future," said AIA Chief Economist Kermit Baker, Ph.D., Hon. AIA. "Interestingly enough, we have also had some survey members reporting that their business is in great shape from a billings and demand standpoint. The one bright spot continues to be the institutional sector with continued positive conditions for construction projects such as schools, hospitals and government buildings."

Commercial construction has been one of the bright spots for the economy, and this slowdown in construction spending will probably impact construction employment significantly.

The normal historical pattern is for residential investment (housing) to lead non-residential structure investment (commercial) by 5 to 8 quarters - both up and down. So this commercial construction slump is right on schedule.