After consecutive months of very modest growth, the Architecture Billings Index (ABI) saw a considerable jump in November to its second highest reading of the year. The commercial/industrial sector recorded its best mark of the decade.
With an approximate nine to 12 month lag time between architecture billings and construction spending, the ABI is a leading economic indicator of construction activity and should translate into a high level of activity throughout 2007. The American Institute of Architects (AIA) reported the November ABI rating was 57.5 up sharply from 51.1 in October (any score above 50 indicates an increase in billings).
“The nonresidential construction sector continues to see a high level of demand for design services,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Even though there has been some deceleration in growth the previous two months, an uptick in billings of this size is noteworthy in portending sustained construction activity in the months ahead.”
Key November ABI highlights:
•Regional averages: West (60.7), Northeast (58.0), South (51.1), Midwest (49.5)
•Sector index breakdown: commercial/industrial (62.9), institutional (54.6), mixed (50.6), residential (47.4)
•Inquiries index: 62.1
Matthew A. Litfin, an equity research analyst with William Blair & Company, stated, “The spike in the ABI this month reflects reinvigorated design activity, now that national elections have concluded and future interest rate policy is clearer. The November ABI reading is near record levels last seen in fall 2005 and before that, in mid-1998. Looking ahead to 2007, we are predicting very strong growth in nonresidential construction activity and stabilization in residential construction activity.”