Architectural billings dropped significantly in August across the nation signaling a slowdown in commercial construction spending by mid-2008. The American Institute of Architects reports that its Architecture Billings Index for August was 53.9, down from 60 in July. Any score above 50 indicates an increase in billings. This is the biggest drop since September 2006 when the index dropped from 59.4 to 52.1.
The index is used as an indicator of future commercial building because there is a nine- to 12-month lag time between architecture billings and construction spending.
American Institute of Architects' Chief Economist Kermit Baker says the decline is characteristic after several consecutive months of strong growth. "This really shouldn't trigger any concern that demand for nonresidential construction projects will dry up," Baker says.
However, there is some apprehension in the industry about the growing default rates among sub prime borrowers which has the potential of making credit more difficult to secure for nonresidential construction projects, he says.
The index is 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.
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