Architecture Billings Index: Just over half of firms report clients feeling at least somewhat nervous about ongoing economic uncertainty

The Architecture Billings Index (ABI) is a leading economic indicator for nonresidential construction activity, with a lead time of approximately 9–12 months. The index is derived from The American Institute of Architects (AIA) Work-on-the-Boards survey, which has gathered data on shifts in billings from architectural firm leaders for over 20 years.

The Most Recent Numbers - Reported in May 2019

Following a downturn in firm billings in March, business conditions at architecture firms returned to the positive side in April, with an ABI score of 50.5 (a score over 50 indicates billings growth). However, while this turnaround is welcome news, billings growth generally remains sluggish, with only a slightly larger share of firms reporting increasing firm billings than reporting decreasing billings. But inquiries into new projects and the value of new signed design contracts both strengthened in April, as firms remain fairly optimistic about future work.

An uptick, but not a huge one

Despite a return to modest growth in the national billings index, billings remained soft at firms in most regions of the country in April. Only firms located in the South continued to report improving business conditions, while firms located in the rest of the country saw declining billings for the third consecutive month. This was most noticeable at firms located in the Northeast, where billings softened even further this month. In addition, firms of all specializations also reported declining firm billings in April, with firms with a commercial/industrial specialization reporting the weakest conditions at this time.

The broader economy continued to grow at a steady pace in April, with nonfarm payroll employment growing by 263,000 positions. Construction employment growth was particularly strong, with 33,000 new positions added in that sector alone, while architecture services employment also continued to grow at a steady clip, adding 800 new positions in March (the most recent data available), for a total of 2,400 new positions added in the first quarter of 2019. In addition, the national unemployment rate continued to decline, falling by 0.2 percentage points in April to 3.6 percent, the lowest unemployment rate in four decades. And the GDP also looked strong for the first quarter of the year, growing at an annual rate of 3.2 percent in that period. This growth was led by increases in personal consumption expenditures, private inventory investment, exports, and a smaller decrease in nonresidential fixed investments.

Firms report client uneasiness

In light of last month’s ABI score of 47.8, which indicated a rather sharp decline in firm billings in March, in this month’s special practice questions we asked responding firm leaders about whether their clients have had any reaction or made any changes to current projects due to ongoing economic uncertainty. Overall, just over half of respondents (52 percent) indicated that nervousness about the economic outlook was affecting their clients either modestly, seriously, or a great deal. Only 11 percent indicated that nervousness about economic uncertainty had a serious impact on their clients, and just 3 percent reported that their clients were affected a great deal. This was generally consistent at firms regardless of size, location, or specialization, but the degree of client nervousness was modestly higher at firms located in the Northeast, as well as at firms with a multifamily residential specialization.

Interpreting the ABI:

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.


National Architecture Billings Index

NATIONAL | amCharts

Source: The American Institute of Architects (AIA)

Regional Architecture Billings Index

ABI REGION 2019 | amCharts

Source: The American Institute of Architects (AIA)

Sector-Specific Architecture Billings Index

Commercial/Industrial
Buildings related to commerce and industry. Office space, banks, retail, factories, etc.

Institutional
Schools, civic/government buildings, museums, hospitals, etc.

Multifamily Residential
Town homes, apartment complexes, condominiums, etc.

Mixed Practice
Buildings that include both residential and commercial/industrial spaces.

SKTR | amCharts

Source: The American Institute of Architects (AIA)

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