Leading Economic Indicator for Construction Activity Suggests Recovery Has Stalled

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By Anuradha Kher, Online News EditorWashington, D.C.–There has been a recent moderation in the downturn in design services billings, but the Architecture Billings Index (ABI) reveals that an economic recovery has stalled for now. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture […]

By Anuradha Kher, Online News EditorWashington, D.C.–There has been a recent moderation in the downturn in design services billings, but the Architecture Billings Index (ABI) reveals that an economic recovery has stalled for now. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI rating for multifamily was 45.5 while for overall it was 42.9, nearly identical to the 42.8 mark in April. Both these scores still indicate an overall decline in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry score was 55.2, the third straight month with a score in the mid-50’s.“The design and construction marketplace is extremely competitive right now,” says AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Prospective clients are casting a wider net causing numerous firms to bid for the same project, which is why the high level of inquiries is not necessarily translating into additional billings for project work at many firms.”Other ABI highlights for May:Regional averages: Northeast (48.3), Midwest (41.5), South (41.3), West (39.4)Sector index breakdown: mixed practice (44.5), commercial / industrial (43.1), institutional (38.0)Project inquiries index: 55.2The Architecture Billings Index is derived from a monthly “Work-on-the-Boards” survey and produced by the AIA Economics & Market Research Group. Based on a comparison of data compiled since the survey’s inception in 1995 with figures from the Department of Commerce on Construction Put in Place, the findings amount to a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction activity. The regional and sector data is formulated using a three-month moving average.

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