ABI breaks bad in October

It looks like all the talk of recession is finally being reflected on architects’ planning boards.

After 20 months of positive growth, the Architecture Billings Index faltered significantly in October, posting a score of 47.7, its first fall since January 2021, according to a release from the American Institute of Architects. Any number below 50 indicates a decline in design firm billings.

The index is widely regarded as a forward-looking indicator for construction activity, since design work typically leads nonresidential building by approximately 9 to 12 months.

The falloff was countered by a sliver of positive news, with inquiries into new projects continuing to grow last month with a score of 52.3. But the value of new design contracts similarly declined, posting just 48.6.

“Economic headwinds have been steadily mounting, and finally led to weakening demand for new projects,” said Kermit Baker, AIA’s chief economist. “Firm backlogs are healthy and will hopefully provide healthy levels of design activity against fewer new projects entering the pipeline should this weakness persist.”

The pullback in the ABI comes on the heels of contractor backlogs likely declining in October, back to pre-pandemic levels.

While the ABI, backlogs and contractor confidence had remained largely positive despite rising costs of construction materials and increased interest rates throughout 2022, the most recent data signals at least a softening of that optimism.

“While one month of weak business conditions is not enough to indicate an emerging trend, it is worth keeping a close eye on firm billings in the coming months,” the AIA said in its report, while highlighting the pending work designers still have on their boards as a potential safeguard against slower conditions.

“Since most firms currently have robust backlogs, there may be enough work in the pipeline to serve as a buffer against a downturn.”

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