Construction Demand Returns to More Modest Growth, AIA Says
After three months of substantial growth, the Architecture Billings Index (ABI) in August fell to a figure more in line with scores seen throughout the spring.
After three months of substantial growth, the Architecture Billings Index (ABI) in August fell to a figure more in line with scores seen throughout the spring.
Tracked by the American Institute of Architects (AIA), the August ABI was 53.9, down from 60.0 in July. This is the biggest drop since September 2006 when the Index dropped from 59.4 to 52.1.
Inquiries for new projects also fell to 60.5, versus the 66.2 achieved in July, according to the AIA.
The ABI shows an approximate nine to twelve month lag time between architecture billings and construction spending. A score above 50 indicates an increase in billings.
“This really shouldn’t trigger any concern that demand for nonresidential construction projects will dry up,” says Kermit Baker, AIA Chief Economist. “It’s actually characteristic that after consecutive months of very high numbers things level off a bit and return to the more temperate positive conditions that we have seen over most of the year.”
“The apprehension in the industry is based around reports that growing default rates among subprime borrowers in the residential market has made credit more difficult to secure for nonresidential construction projects,” Baker says.
The downward trend in the ABI is natural in light of the concern in the market, says Heather Bellini, UBS Investment Bank managing director. “All in, however, we believe the market dynamics for industry leading CAD software vendors remains strong, especially given the long-tailed cycle of 2D to 3D migration,” Bellini says.
Key August ABI highlights:
Regional averages: Northeast (61.2), West (58.8), South (56.0), Midwest (52.2)
Sector index breakdown: commercial / industrial (65.0), institutional (51.6), mixed practice (58.2), multi-family residential (48.7)
Billings inquiries index: 60.5
The diffusion indexes contained in the full report are derived from a monthly survey 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. According to the proportion of respondents choosing each option, a score is generated, which represents an index value for each month.
Related Topics:
