August’s AIA Architecture Billings Index reports a decline, suggesting slowed business conditions

For eleven months the Architecture Billings Index (ABI), an economic indicator published monthly by the AIA, has remained “essentially flat.” The month of August reported a score of 48.1, a noticeable drop from last month’s 50.0, any score below 50 signifies a drop in billings.

In the monthly report, Kermit Baker, the AIA’s chief economist, said business conditions for the architecture industry “continue to be sluggish.” The decline in billings follows a strong period of growth reported in the latter part of 2021 and 2022. For most of 2023 the billings index has teetered above and below the 50.0 threshold. In August, the value of signed design contracts dropped for the first time since April to 47.9. While new project inquiries remain up, with a score of 54.8, according to the report “the pipeline of future work may be starting to slow.”

“New project work coming into architecture firms as well as ongoing project activity remain stalled in a relatively narrow range and exhibit very little month-to-month variation,” Baker added in a statement. “Though this pause has taken pressure off tight staffing conditions across the profession, there is considerable uncertainty over the direction of future activity.”

Each month in addition to the national score the AIA also breaks down billings by region and building sector. In August, the Northeast was the only region to report a billings score higher than 50.0, coming in at 50.6. After several strong months the Midwest dipped under 50.0 with a score of 48.1. As has been the trend recently, firms specializing in multifamily residential have again reported a drop in billings, while firms with a focus on commercial/industrial projects again reported growth with a score of 51.5, just a slight drop from July’s 52.7.

Each month along with the billings index, the AIA asks participating firms to respond to questions. In August firms were asked whether they outsource design work; only 16 percent said they outsource domestic design work offshore. The firms most likely to do this specialize in multifamily residential projects.

The question is in line with other data presented in the monthly economic report, including that conditions appear to be “softened” in the “broader economy” with nonfarm payroll employment slowed considerably from what it was last year. In the architecture industry, in the month of July, just 100 new positions were added, a considerable decline from the 1,000 reported in June. This is all amid continued rising inflation rates. Tune back in next month to see whether the billings index climbs back above 50.0 or takes another dive.

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