Business Conditions Show Continued Strength in Some Regions
As has been the case a few times already in 2015, the Architecture Billings Index (ABI) dipped in November 2015. As a leading economic indicator of construction activity, the ABI reflects the approximate nine- to 12-month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 49.3, down from the mark of 53.1 in the previous month. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.6, up just a nudge from a reading of 58.5 the previous month.
“Since architecture firms continue to report that they are bringing in new projects, this volatility in billings doesn’t seem to reflect any underlying weakness in the construction sector,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Rather, it could reflect the uncertainty of moving ahead with projects given the continued tightness in construction financing and the growing labor shortage problem gripping the entire design and construction industries.”
Key November ABI highlights:
- Regional averages: South (55.4), West (54.5), Midwest (47.8), Northeast (46.2)
- Sector index breakdown: multi-family residential (53.8), institutional (52.0), commercial/industrial (51.0), mixed practice (47.6)
- Project inquiries index: 58.6
- Design contracts index: 53.5
The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.
The Architecture Billings Index (ABI), produced by the AIA Economics & Market Research Group, is a leading economic indicator that provides an approximately nine- to 12-month glimpse into the future of nonresidential construction spending activity. The diffusion indexes contained in the full report are derived from a monthly “Work-on-the-Boards” survey that is sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended as compared to the prior month, and the results are then compiled into the ABI. These monthly results are also seasonally adjusted to allow for comparison to prior months. The monthly ABI index scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline. The regional and sector data are formulated using a three-month moving average.
More information on the ABI and the analysis of its relationship to construction activity can be found in the recently released White Paper, “Designing the Construction Future: Reviewing the Performance and Extending the Applications” of the AIA’s Architecture Billings Index on the AIA website at aia.org.