March 3, 2010—Beginning its third year of negative conditions, the Architecture Billings Index (ABI) reported a drop of almost three points in January, said the American Institute of Architects (AIA). 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.
AIA reported the January ABI rating was 42.5, down sharply from a revised reading of 45.4 in December. (Every January the AIA research department uses a procedure from the Department of Commerce that re-estimates ABI data based on seasonal patterns, resulting in a recalibration of recent figures.) This score indicates a continued decline in demand for design services — any score above 50 indicates an increase in billings. The new projects inquiry score was 52.5, down more than seven points.
Key January ABI highlights include:
- Regional averages: Midwest (48.0), Northeast (45.7), South (41.32), West (40.5)
- Sector index breakdown: multi-family residential (50.1), commercial / industrial (44.9), institutional (43.1), mixed practice (40.3)
- Project inquiries index: 52.5
“Projects are being delayed or cancelled because lending institutions are placing unusually stringent equity requirements on new developments. This is even happening to financially sound companies with strong credit ratings,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA.
“This serious situation is being compounded by a skittish bond market, decreased tax revenues for publicly financed projects and declining property values — all which serve as deterrents for construction activity. Until these factors are resolved, the design and construction industry — which accounts for roughly 10 percent of GDP and is facing unemployment figures in excess of 20 percent — will continue to face deteriorating market conditions.”
