After Gains, Construction Stalling

American Institute of Architects
American Institute of Architects
American Institute of Architects

Before you build something, you get an architect. House, school, office building, apartment building, whatever, and that's why I find the Architectural Billings Index, from the American Institute of Architects, so very interesting. This index measures billings from AIA member-owned firms and reflects the approximate nine to twelve month lag time between billings and construction spending. And it's monthly.

Today the AIA reported the August ABI rating was 41.7, down slightly from 43.1 in July.

This score indicates a decline in demand for design services (any score above 50 indicates an increase in billings).

But this comes after several months of gains. I called the AIA's chief economist, Kermit Baker.

"The ABI is back from the real dark spot it was in six months ago," says Baker, "but our members say people aren't beating down the doors." Despite the upturn in the economy, Baker says there has been more tire kicking than investment in new projects. Right now there's just not a lot of pressure to invest in new plant and equipment structures.

"We've been on a frozen rope since the spring. We were hoping it would inch its way back to recovery but it hasn't made any progress."

Baker notes that on the commercial side, the construction sector went into this recession in "pretty good shape. There was no oversupply in office or hotel, but now with less office demand thanks to job losses, even if we were reasonably healthy at the beginning of 2008, we're going to be out of balance now." He just doesn't see expansion "roaring back."

Questions? Comments?