With Wall Street in the throws of its greatest crisis in decades, the AIA released today it latest Architecture Billings Index, which continues to show a struggling design market. Billings continued to inch up in August, now for the fourth straight month, but they remained in overall decline. Furthermore, uneven numbers within the various regions and sectors cast doubt on whether the trend is towards recovery or simply stagnation.
“There’s really no pattern to these numbers except for weakness,” Kermit Baker, chief economist for the AIA, told AN. Baker said that when this downturn in billings began at the start of the year, “I expected them to hover in the 40’s for some months, and that has been the case.” The index measures productivity on a scale of 1-100, with any number above 50 indicating an increase and any number below a decrease.
For August, billings rose to 47.6 from 46.8 while inquiries fell to 52.4 from 54.6, another indication that there could be waning interest in design work. Still, inquiries were higher than June, when they were 51.4, or May, when they hit 46.5, the first sub-50 reading in index’s history.
Regionally, the Northeast and Midwest were each down roughly a point to 45.2 and 49.4, respectively. The South rose to 49.2 from 47.7, flirting with growth. And the West, which had been the hardest hit, posted the strongest gains, to 45.0 from 42.2, though it remained the weakest region.
The multi-family residential sector continues to be the weakest, rising to 40.8 from 39.2 and posting its sixth consecutive—and strongest overall—gain, from 31.7 in March. The commercial and mixed-use sector each fell a point-and-a-half to 47.5 and 44.8. The institutional sector continued to be the one bright spot for billings, though it did slip to 52.2 from 53.6. If credit continues to be an issue, though, even that sector could be struggle. A number of state governments have already begun to restructure their budgets facing mounting deficits, which could threaten such projects.
As for the problems set off earlier this week at Lehman Brother, Merrill Lynch, and AIG, Baker said any impact on the design and construction industry would be readily evident in the index in the next month or two. “There would be a pretty dramatic drop in inquiries almost immediate and then a further drop in billings some months after that,” he said. “If there ain’t money out there for these projects, they’re no going to happen, and we should know soon enough.” Until then, AN will keep you posted.