May 18th, 2011
Econintersect: The AIA (American Institute of Architects) announced a significant downturn in their Architectural Billing Index (ABI) for April. The index reflects new construction activity 6-9 months in the future. The index declined by 2.9 points to 47. 6 in April. A one-month decline is not necessarily significant, but the April data appears to confirm that a down trend in architectural billings started in January. The December, 2010 index stood at 54.2. The April reading is 6.6 points, (12% lower) than four months ago. Follow up:
Inquiries about possible future architectural work has also declined. The inquiries index has declined in April as well, but still remains above 50, the boundary between growth and contraction.
From the AIA release:
The AIA’s Architecture Billings Index (ABI) fell sharply in April--the first slowdown in billings at architecture firms since last October. Business conditions at architecture firms had been slowly improving for the last few months, so it remains unclear if this month’s downturn is a bump in the road to recovery, or indicative of a longer-term reversal in the two-quarter recovery in design activity. Firms reported that the threatened federal government shutdown, tornadoes though the Southeast, and the winding down of federal stimulus funds for building activity all were impediments to design activity in April.
In other words, the AIA believes that the April reading may be an anomaly. However, they also report that availabilty of financing is having a negative effect on billings, with most firms reporting at least one project being delayed for that reason.
Calculated Risk provides some longer-term perspective of the ABI.
The sharpness of the 2011 decline is very evident and the pivotal nature of the AIA speculation that the April drop is a temporary situation becomes very clear look at the above graph. If the April decline is sustained, construction would appear to be functioning at a level associated with low points that occurred prior to The Great Recession.