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Friday, October 31, 2008

Architecture Billings Index: Falls "precipitously"

by Calculated Risk on 10/31/2008 10:04:00 AM

I overlooked the ABI this month (hat tip Karl). Here is the American Institute of Architects billing index for September: Architecture Billings Index Falls More than Six Points

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

Following three consecutive months of signs of greater stability in design activity, the Architecture Billings Index (ABI) fell precipitously, dropping more than six points. 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 September ABI rating was 41.4, down sharply from the 47.6 mark in August (any score above 50 indicates an increase in billings). The inquiries for new projects score was 51.0. This is also the first time in 2008 that the institutional sector has fallen below the 50 mark.

“With all of the anxiety and uncertainty in the credit market, the conditions are likely to get worse before they get better,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Many architects are reporting that clients are delaying or canceling projects as a result of problems with project financing.”
emphasis added
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 in late 2008 and throughout 2009.