Architecture Billings Index Drops Again, Fears in Residential Credit Market Blamed
For the second consecutive month, the American Institute of Architects' (AIA) Architecture Billings Index has declined. With a rating of 51.1 in September, the score has dropped to its lowest level since June 2006.
For the second consecutive month, the American Institute of Architects' (AIA) Architecture Billings Index has declined. With a rating of 51.1 in September, the score has dropped to its lowest level since June 2006.
As an economic indicator of construction activity, the ABI shows an approximate nine to twelve month lag time between architecture billings and construction spending. The September ABI rating was 51.1, down from the previous mark of 53.9 (any score above 50 indicates an increase in billings), according to the AIA. Inquiries for new projects was 61.4.
“While there is plenty of nonresidential construction activity in the pipeline over the coming months, the demand for new projects is tapering off a bit.” says AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The fallout from the subprime mortgage meltdown in the residential market has seeped into the nonresidential sector causing project delays and a tightening market for financing. There is also emerging concern in the industry that this situation will extend into 2008.”
September ABI highlights:
Regional averages:
South (53.0),
Northeast (52.0),
West (52.0),
Midwest (49.5)
Sector index breakdown: mixed practice (55.0), commercial / industrial (54.9), institutional (49.0), multi-family residential (44.3)
Billings inquiries index: 61.4
"Our clients are watching closely for signs of trouble in nonresidential construction," says Robert Wertheimer, Morgan Stanley machinery analyst. "So far, data are consistent with our view of a slowdown, not a meltdown, in nonresidential construction growth. With the core ABI index showing growth, and commercial/industrial showing solid, if declining, growth, we see the environment as still relatively healthy. The falloff this month, though, is reason for continuing attention.”
About the AIA Architecture Billings Index
The 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 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.
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