AIA reports another drop in the billings index as downturn persists

by Matt Chaban
Original story at Architectural Record

The uptick seen last month in the AIA’s Architecture Billings Index may have been more of a temporary bounce then a turnaround for the market, as initially predicted. On June 18, the AIA announced that the billings numbers are once again down, though only a modest two points, which suggests that work will continue to decline though no longer at a precipitous rate, as it first did when the slide began in February.

“I think where we’re looking now is when do we see some signs that this is actually beginning to turn around,” said Kermit Baker, the chief economist for the AIA, who created the index 13 years ago. “Five or six months in, we’d expect to start seeing that, but we haven’t yet. That will be the next thing we’re looking for, but there’s nothing in this report pointing to it.”

The index fell to 43.4 points in May from 45.5 in April, though still well above the historic low of 39.7 reached in March. Any score above 50 means billings are rising, while those below mean they are falling. Based on the numbers, and especially inquiries, which are down to 46.5 points—a historic low—Baker said the architectural downturn could persist for at least another six months.

The one bright spot is institutional work, which has remained strong despite a continued sag in the commercial and residential markets. “As long as institutional work stays strong, we’re in okay shape,” Baker said. “It’s a big part of the market. As for the other two, Baker said to keep an eye on the bigger economic trends to look for a change—consumer confidence and job growth for commercial work; housing starts for residential. And though there was some movement within the various regions, Baker said they remain within the realm of statistical variability and probably do not auger a larger trend.
“If I was a developer right now, I would probably look at the market and lay off for a while,” Baker said. “There’s just not enough demand.”

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.

About The American Institute of Architects
For over 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. www.aia.org

Contact: Scott Frank
202-626-7467
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