Demand for commercial and industrial projects leads to highest figure in over a year
After hovering around the no growth mark for the past three months, the Architecture Billings Index (ABI) jumped in August to its highest mark since July 2005. Demand for commercial / industrial projects continues to lead the way for increased billings, along with architecture firms on the East and West coast reporting a significant upturn in business. Based on the approximate six to nine month lag time between architecture billings and construction spending, the latest figures are very encouraging for the overall economy because they suggest a strong outlook in the commercial construction market well into 2007. The American Institute of Architects (AIA) reported the August ABI rating was 59.5 (any score above 50 indicates an increase in billings), a substantial rise from the 51.8 mark in July.
“The August numbers showed a sharp rebound from the unusually slow conditions of the past three months. It appears that this nonresidential construction spending cycle has sustained momentum,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Despite higher short-term interest rates and increasing costs of building materials, the nonresidential construction sector continues to help fuel the economy during a time when the housing market is suffering.”
Key August ABI highlights:
• Regional averages: West (61.2), Northeast (57.3), South (56.7), Midwest (49.1)
• Sector index breakdown: commercial / industrial (61.4), institutional (55.7), mixed (53.9), residential (48.0)
• Billings inquiries index: 64.3, up slightly from the 64.0 score in July
CIBC World Markets Industrial Multi-Industry Analyst, Christopher Glynn said, “The improvement from July in each subcategory of the ABI is a critical datapoint at this point in the construction cycle, where concerns over the direction of the macro economy and the impact of building materials inflation have created concern over the environment for construction spending. With the continued acceleration of the commercial/industrial billings and the strong historical correlation to future construction spending, we note improved visibility for electrical equipment manufacturers with meaningful exposure to nonresidential construction.
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 six 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.
About The American Institute of Architects
For almost 150 years, members of The American Institute of Architects have worked with each other and their communities to create more valuable, healthy, secure, and sustainable buildings and cityscapes. AIA members have access to the right people, knowledge, and tools to create better design, and through such resources and access, they help clients and communities make their visions real.
