by Calculated Risk on 12/17/2008 12:14:00 PM

The American Institute of Architects reports: Architecture Billings Index Drops to All Time Low for Second Straight Month

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Business conditions at architecture firms continue to deteriorate, with the Architecture Billings Index (ABI) posting its lowest level since the survey began in 1995 for the second month in a row. As a leading economic indicator of construction activity, the ABI shows an approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI rating was 34.7, down from the 36.2 mark in October (any score above 50 indicates an increase in billings). The inquiries for new projects score was 38.3, also a historic low point.

“With mounting job losses, declines in retail sales, and travel cut-backs the need for new commercial facilities has dropped considerably recently,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “What’s just as troubling is that the institutional sector --schools, hospitals and public buildings -- is also beginning to react to tighter credit conditions and a weakening economy.”

This is the 2nd leg down for the index this year. There is "an approximate nine to twelve month lag time between architecture billings and construction spending", so we should expect the first decline in architecture billing to impact non-residential structure investment this quarter (Q4 2008), and a further downturn in non-residential construction activity in mid-2009.