Architecture Billings Index Reflects Continued Weakness

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THE MOST RECENT REPORT: MAY 24, 2023

Architecture Billings Index Reflects Continued Weakness in Business Conditions in April

WASHINGTON – Architecture firms reported a modest decrease in April billings. However, there was a slight increase in inquiries into future project activity according to a report released today from The American Institute of Architects (AIA).

The billings score for March decreased from 50.4 in March to 48.5 in April (any score below 50 indicates a decrease in firm billings). However, firms reported that inquiries into new projects accelerated slightly to 53.9, while most firms continued to report a decline in the value of new design contracts, with a score of 49.8.

“The ongoing weakness in design activity at architecture firms reflects clients’ concerns regarding the economic outlook,” said AIA Chief Economist Kermit Baker Hon. AIA, Ph.D. “High construction costs, extended project schedules, elevated interest rates, and growing difficulty in obtaining financing are all weighing on the construction market.”

Despite the recent softness in billings, many firms are cautiously optimistic about this year. As the construction market cools, construction costs and schedules are expected to ease, which may make some projects more feasible. In addition, firms will continue to be able to capitalize on opportunities related to green building and energy efficiency initiatives that have increased over the past few years.

Key ABI highlights for April include:

Regional averages: Midwest (51.2); West (49.3); South (48.7); Northeast (47.2)
Sector index breakdown: mixed practice (firms that do not have at least half of their billings in any one other category) (52.1); commercial/industrial (51.8); institutional (50.6); multi-family residential (41.5)
Project inquiries index: 53.9
Design contracts index: 49.8

The regional and sector categories are calculated as three-month moving averages and may not always average out to the national score.

*Every January the AIA research department updates the seasonal factors used to calculate the ABI, resulting in a revision of recent ABI values.

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Interpreting the ABI:

The Architecture Billings Index (ABI) is a leading economic indicator of construction activity. It is produced by the American Institute of Architects (AIA) and it reflects the approximate nine-to-twelve month lead time between architecture billings and construction spending.

The ABI is based on a monthly survey of architecture firms that asks respondents to rate the level of their billings (or the amount of new design contracts) as either "increase," "decrease," or "no change" from the previous month. The results are then compiled into an index, where a score above 50 indicates an increase in billings, and a score below 50 indicates a decrease in billings.

The ABI is widely used in the construction industry, as well as by economists and analysts, to track the health of the construction market and to forecast future building activity. It is considered a leading economic indicator because changes in architecture billings often precede changes in overall economic activity, such as employment and GDP.

The ABI provides a snapshot of the demand for design services as well as an indication of the near-term outlook for the construction industry.

The survey panel asks participating architectural firms whether 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.

An index score of 50 indicates no change in firm billings versus the previous month.
A score above 50 indicates an increase in firm billings versus the previous month.
A score below 50 indicates an decrease in firm billings versus the previous month.
NOTE: Index numbers cited for the last three reported months are preliminary.
The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

Source: The American Institute of Architects (AIA)