Wednesday, August 18, 2010

ABI Improves, But Still Shows Decline

The American Institute of Architects' Architecture Billings Index rose almost two full points in July, but still shows a decline in demand for design services.

The July ABI rating was 47.9, up from 46.0 in June. The ABI continues its up and down rollercoaster ride as it has gone from 48.4 in April to 45.8 in May to 46.0 in June and 47.9 in July. Yet, the score reflects a continued decline in demand for design services as any score above 50 indicates an increase in billings.

As a leading economic indicator of construction activity, the ABI reflects the approximate 9- to 12-month lag time between architecture billings and construction spending. What the July ABI rating means, therefore, is that it's going to be at least spring 2011 before we even begin to see things get better in the AEC industry.

"Business conditions at design firms remain quite volatile," said AIA Chief Economist Kermit Baker. "While this recent uptick is encouraging, this state of the industry is likely to persist for a while as we continue to receive a mixed bag of feedback on the condition of the design market from improving to flat to being paralyzed by uncertainty."

As we said last month, until the ABI shows AT LEAST three consecutive months ABOVE 50, don't believe any projections that things will get better anytime soon. There's just no quantifiable data that anyone can point to with certainty that shows WHEN things will get better.

The new projects inquiry index dropped substantially from 57.7 to 53.1.

Regionally, the ABI breaks down as follows: Northeast (47.2, down from 47.7), South (47.9, up from 46.7), Midwest (46.7, up from 46.3), and West (45.2, up from 43.6). The South and West have improved for two consecutive months while the Northeast has dropped for two straight months.

By market sector, the ABI is as follows: commercial/industrial (50.4, down from 50.6), institutional (47.9, up from 45.0), multi-family residential (47.5, up from 46.5), and mixed practice (42.9, down from 44.7). Institutional is up for two straight months while commercial/industrial and mixed practice have dropped for two straight months.


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