Thursday, August 19, 2010

The Architecture Billing Index (Leading Indicator) Improves in July and In 5 Out of the Last 6 Months

The American Institute of Architects (AIA) released its monthly Architecture Billings Index (ABI) yesterday for July, which improved to 47.9 last month compared to June, and
marked the fifth monthly increase during the last six months.  Also, the July reading was almost the highest index level for the ABI since January 2008, second only to a 48.4 reading in April (see chart above).  According to the AIA:

"The Architecture Billings Index (ABI) is a diffusion index derived from the monthly Work-on-the-Boards survey, conducted by the AIA Economics & Market Research Group. The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months. The indexes are developed from the monthly Work-on-the-Boards survey panel where participants are asked whether their 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."

MP: The ABI has shown steady improvements since the early 2009 bottom of 33.9 (the lowest-ever level since the ABI started in late 1995), and is now 14 full points higher at 47.9 in July.  The chart above also shows that the readings of the ABI in recent months (mid to high 40s) are now comparable to the post-2001 levels for the index of architecture billings following the last recession.  As a leading indicator of future commercial construction activity, the steady improvements in the ABI since early 2009 could indicate increases over the next year in nonresidential building.   


At 8/19/2010 3:08 PM, Blogger morganovich said...

but it is still contracting.

a reading below 50 indicates contraction. all this means is it's not getting worse as quickly, but has not yet bottomed.

this is a chart of first derivative, not underlying billings.

july was the 31st consecutive month of contraction in this index.

the current reading is about the overall average for this index during the 2001 recession.

At 8/19/2010 4:45 PM, Blogger Bill said...

It is fairly obvious from the chart that an inflection point has been reached and that positive growth appears likely in the near future.

At 8/19/2010 4:48 PM, Blogger A. Rose said...

Also correlates to the release of stimulus funds under ARRA. Too early to tell if any non-res construction activity is sustainable w/o gov't stimulus.

At 8/19/2010 6:19 PM, Blogger James said...

Is there a limit to how long “leading indicators” can be wrong and still be trusted?

At 8/19/2010 7:31 PM, Blogger Bill said...

I would be interested in your take on the big drop in the Phily Fed index. It seemed to be a favorite of your when we were coming out of the recession. Do you think it is predicting a double-dip?


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