Architecture Billings Index Bounces Back Strong In September

After a small decrease in architecture billings in August, the Architecture Billings Index (ABI) came back strong in September with a score of 53.7 indicating an increase in billings. This is the third highest ABI score this year, coming in just behind June (55.7) and July (54.7). The ABI acts as a predictor of future nonresidential construction spending. The average lead time between billings and construction spending is between nine and twelve months. (Scores above 50 indicate an increase in billings and scores below 50 indicate a decrease.)

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To highlight the point about the ABI acting as a barometer of future construction spending let’s take a look at some scores from last year. Scores from 2014 were 55.8 in July, 53.0 in August and 55.2 in September. All of these months showed a strong increase in billings and construction spending roughly a year out reflects those scores. The seasonally adjusted annual rate of construction spending in July 2015 was 1,079.1 billion and increased to 1,086.2 billion in August 2015.

The design contracts index score was 53.2 and the new projects inquiries index was 61.0 in September, both showing growth. The project inquiries index was at 61.8 the previous month and the design contracts index was at 55.3.

The Northeast region continues to be the only area showing a decrease in billings based on the three-month regional averages. All other regions had scores above 50 in September. This is the second consecutive month decreased after being above 50 in June and July. The South was back on top with a score of 54.5 with the Midwest right behind at 54.2 and the West was at 51.7

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The three-month sector index averages had Mixed Practice with the highest score at 52.6, followed by Institutional at 51.5 and Commercial/Industrial getting back into growth mode with a score of 50.9. Multi-family Residential was the only sector to remain below 50 and came in with a score of 49.5, matching last month’s three-month average for the sector.

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The ABI has shown growth in six of nine months so far this year, indicating that 2016 will be another strong year for construction spending. Of the three months that had decreases in billings, April at 48.8 was the lowest score so far this year so it shouldn’t be much of a concern as we look toward next year.

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