Architecture Billings Index slips, overall outlook remains positive

October 1st, 2016 / By: / News

On the heels of six out of seven months of increasing levels of demand for design services, the Architecture Billings Index (ABI) fell just below the positive mark. 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 August ABI score was 49.7, down from the mark of 51.5 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 61.8, up sharply from a reading of 57.5 the previous month.

“This is only the second month this year where demand for architectural services has declined, and it is only by a fraction of a point,” said AIA chief economist, Kermit Baker, Hon. AIA, PhD. “Given the solid numbers for new design contracts and project inquiries, it doesn’t appear that this is the beginning of a broader downturn in the design and construction industry.”

Key August ABI highlights:

  • Regional averages: South (55.2), Midwest (52.8), West (49.0), Northeast (44.9)
  • Sector index breakdown: mixed practice (51.8), multi-family residential (50.9), commercial / industrial (50.8), institutional (50.7)
  • Project inquiries index: 61.8
  • Design contracts index: 52.7

The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

The 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.

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