The American Institute of Architects (AIA) officially introduced the Architecture Billings Index (ABI), based on the results of a monthly “Work-on-the-Boards” survey of U.S. architecture firms. Accounting for 8% of Gross Domestic Product, construction activity typically follows billings for architectural services by approximately six months.
Billings at architecture firms in September made their largest monthly gain since 1998, generating a score of 60.5 on the ABI (any score above 50 indicates an increase in billings at architecture firms), following a score of 55.9 in August. Recent increases in design activity expect to translate into similar increases in construction activity in early 2006. Inquiries for new design projects scored 62.5, indicating more expected future growth in design activity, however the pace for project inquires in September slowed somewhat compared to July and August levels.
Highlights from the September ABI:
*Architecture firms in all regions reported improvement in business conditions, with firms in the South reporting the strongest improvement;
* Increases in selected construction commodities and problems with availability of building materials has caused inflation to become a key concern; and
* Construction outlook for 2006 positive based on favorable economic conditions (low interest rates, moderate overall inflation).
“The findings in the Architecture Billings Index should be encouraging for the nonresidential construction industry and those business sectors affected by it,” says AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “The positive outlook should be tempered, however, because of the effect that rising energy prices, increased costs for building materials, and the possibility of rising interest rates will have on the overall economy in the months to come.”
The Architecture Billings Index is produced by the AIA Economics & Market Research Group. The findings amount to a leading economic indicator that provides an approximately six month glimpse into the future of nonresidential construction activity. The 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.