Wednesday, November 24, 2010

AIA’s Architecture Billings Index grows slightly in September, but slips in October

The American Institute of Architects’ Architecture Billings Index showed that architectural firms reported the first monthly increase in design activity in September since early 2008. While this increase showed promise of a possible turnaround in the recession, it proved to be short lived. In October, the numbers dipped back down to previous levels.

The Architecture Billings Index (ABI) serves as the leading economic indicator of construction activity, and reflects the approximate 9-to-12 month lag time between architecture billings, and actual construction spending.

The index registered a score of 50.4 for September, up from 48.2 in August. Any score above 50 signifies growth at U.S. architecture firms, and the September score is the first reading above 50 since January 2008. In October, the ABI dropped back below 50 to 48.7. Until the ABI rating remains above 50 for at least three consecutive months, there is no evidence of a strong economic upswing. The October rating means that it won’t be until around summer 2011 until things improve could really start to improve significantly for the AEC industry.

While these figures may not come as a total surprise, there is indeed light at the end of the tunnel. Inquiries for new work remain quite high at 61.7, and architecture firms located in the Northeast and Midwest reported growth in firm billings for the third month in a row in October. Business continues to improve in these two regions of the country, with both reporting their highest scores in nearly three years; 54.5 in the Northeast and 51.8 in the Midwest. Firms with commercial/industrial specialization experienced their sixth consecutive month of growth in October, and firms with an institutional specialization reported a small expansion, the first for the sector since December 2007.

On a wider scale, recently released economic reports show slight improvement of the economy in general. The GDP grew at an annual rate of 2% in the third quarter, up from 1.7% in the second. Also, employment improved in October, with businesses adding 151,000 new jobs. Despite this, construction employment remained relatively flat, and that in the architectural services sector decreased for the second month in a row in September (latest data available). It’s important to note though, that this data is not seasonally adjusted to account for the annual slowdown of the industry as winter approaches. Finally, survey panelists reported that on average 88%of their projects (on a dollar basis) have a signed design contract.

Regionally the ABI breaks down as follows from September to October: Northeast is down 54.5 from 56.7, South up 48.6 from 47.0, West down 44.3 from 44.5, and Midwest up 51.8 from 51.0.

By market sector Mixed is down 43.2 from 44.2, Commercial/Industrial is up 56.7 from 56.3, Institutional is up 50.8 from 47.9, and Residential is up 49.1 from 47.0.

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