Architecture Billings Index Indicates Continued Struggles for Construction Industry

09/24/2009 |

Indicating another stall in the recovery for the construction industry, the Architecture Billings Index (ABI), a leading economic indicator of construction activity, fell to its lowest level since June. The ABI reflects the 9- to 12-month lag time between architecture billings and construction spending.

According to the American Institute of Architects (AIA), the August ABI rating was 41.7, a slight decrease from July’s 43.1, indicating a decline in demand for design services (any score above 50 indicates an increase in billings). However, the new projects inquiry score was 55.2.

The August ABI regional averages were: 45.2 for the Northeast, 44.1 for the South, 43.0 for the Midwest, and 37.5 for the West. Additionally, the ABI index for the commercial/industrial sector was 45.6; the rating was 43.4 for multi-family residential, 41.4 for mixed practice, and 37.5 for institutional.

AIA Chief Economist Kermit Baker says “While there have been occasional signs of optimism over the last few months, the overwhelming majority of architects are reporting that banks are extremely reluctant to provide financing for projects, and that new equity requirements and conservative appraisals are making it even more difficult for developers to get loans.” Baker also says, “Until the anxiety within the financial community eases, these conditions are likely to continue.”

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