AIA ABI Index for May 2013; strong rebound from April

by Bill McBride on 6/19/2013 09:52:00 AM writing for calculatedriskblog.com

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. 



Following the first reversal into negative territory in ten months in April, the Architecture Billings Index has bounced back in May.

As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI score was 52.9, up dramatically from a mark of 48.6 in April. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.1, up slightly from the reading of 58.5 the previous month.

“This rebound is a good sign for the design and construction industry and hopefully means that April’s negative dip was a blip rather than a sign of challenging times to come,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “But there is a resounding sense of uncertainty in the marketplace – from clients to investors and an overall lack of confidence in the general economy – that is continuing to act as a governor on the business development engine for architecture firms.”

Anything above 50 indicates expansion in demand for architects' services.  This index has indicated expansion in 9 of the last 10 months.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  The increases in this index over the past 10 months suggest some increase in CRE investment in the second half of 2013.