Architectural Billings Prolonged Slump Continues

abi architecture billings index aia (6)a.jpg

THE MOST RECENT REPORT: April 24, 2024

In March 2024, the Architecture Billings Index (ABI) reported by the American Institute of Architects (AIA) revealed a decline in architecture firm billings to 43.6, continuing a long downward trend influenced by inflation and supply chain disruptions. The ABI also noted a stagnation in the value of new design contracts, indicating client hesitancy despite growing inquiries. Regionally, the Midwest and South experienced the softest business conditions, with all firm specializations seeing declines, except for those with an institutional focus, which remained flat.

The AIA reported that in the broader economic landscape, although employment showed gains, the pervasive inflation, highlighted by a 3.5% year-over-year increase in the Consumer Price Index, suggests that the Federal Reserve might delay interest rate reductions. The ABI March 2024 update also highlighted the challenges in negotiating project design fees, with nearly half of the surveyed leaders finding it more difficult than in previous years, reflecting ongoing economic pressures on the architecture sector.

Key ABI highlights for March include:

Regional averages: Northeast (46.0); Midwest (45.2); South (45.3); West (47.6)
Sector index breakdown: commercial/industrial (42.9); institutional (49.9); multifamily residential (44.2);

The ABI score is a leading economic indicator of construction activity, offering a nine-to-twelve-month forecast of nonresidential construction spending. The score is calculated from a monthly survey of architecture firms that tracks the change in billings from the previous month.

Regional and sector categories are measured as three-month moving averages and may not align with the national score.

Inside Lighting strives to accurately report certain data on the day it is reported by the AIA, but updates to past data with new three-month rolling averages might not be made. For official and most current reports, refer to the AIA ABI numbers. All information is sourced from the AIA.

ARTICLE CONTINUES BELOW AD

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)