What is the architecture billing index (ABI)?
The Architecture Billings Index (ABI) is a leading economic indicator of demand for non-residential construction activity. This includes both commercial and industrial buildings. A positive ABI can be a sign of strength or recovery in the overall economy, while a negative ABI can indicate weakness or an impending recession.
- The Architecture Billings Index (ABI) is an economic indicator that provides a nine- to 12-month view of spending and demand for non-residential construction activity.
- The commercial and industrial building activity includes the construction of hotels, office buildings, multi-family residences, schools, hospitals and other institutional buildings.
- A score of 50 or more indicates an improvement in construction levels in the non-residential sector, but does not necessarily indicate stronger demand because the index does not quantify the responses of companies.
- The ABI is used in combination with other economic indicators, such as new home sales, to make sense of the overall economic picture.
- A positive ABI can be a sign of strength or recovery in the overall economy, while a negative ABI can indicate weakness or an impending recession.
Understanding the architecture billing index (ABI)
The Architecture Billings Index (ABI), produced by the AIA Economics & Market Research Group, is based on responses to the American Institute of Architect (AIA) monthly Work-on-the-Boards survey, which asks directors and partners of AIA members of IP architecture firms if their billing activity during the previous month increased, decreased or remained stable.
Based in Washington, DC, the AIA has been collecting member data through this survey for more than 20 years. The ABI provides a roughly nine to 12-month view into the future of non-residential construction spending activity. The commercial and industrial building activity includes the construction of hotels, office buildings, multi-family residences, schools, hospitals and other institutional buildings.
Monthly results are seasonally adjusted to allow comparison with previous months. Regional and sectoral data are formulated using a three-month moving average. The change in billing activity provides information on the level of demand for design services by architectural firms, which in turn provides information on the level of interest in the construction of new buildings.
The ABI provides information at the national and regional levels and is broken down by sector. In the United States, in January 2020, before the pandemic recession, the national ABI stood at 52 for billing and 56 for design contracts. By November 2020, the ABI has decreased to 46.3 for billing and 48.6 for design contracts. The latest ABI reading (May 2021) shows that business conditions at architecture firms had recovered to 58.5 for billing and 63.2 for design contracts.
Interpretation of ABI scores
A score of 50 indicates a balance between positive and negative reports, while a score of 100 indicates that all companies reported improvements. An increase in the index above 50 means that more companies reported an increase in demand for design services than reported a decrease in demand.
It is important to note that an increase in the index above 50 is not a direct measure of increased demand, because the survey does not ask companies reporting stronger demand to quantify the level of increased demand, nor does it provide size information. of those companies. That said, higher readings on the ABI generally coincide with increasing demand.
The ABI affects many types of businesses, from architectural firms to reprographics companies and contractors. Design and construction companies consult ABI when conducting strategic planning and determining changes in the business cycle, as it is a good indicator of market fluctuations and construction trends. The AIA also offers an inquiry index, which measures potential business versus actual business.
Financial experts and advisers look at the ABI in combination with other economic indicators, such as new home sales, wood futures prices, and gross domestic product (GDP) data, to help understand the state of the economy and help with investment decisions.
The ABI also assists companies involved in the design and construction process in a variety of ways. For example, it can help architecture firms with budgeting, identifying opportunities, managing resources, managing hiring and payroll, and sharing guidance.