Billings Hit the Reset Button

Billings Hit the Reset Button

The uncertainty that has gripped the rest of the economy is taking a toll on the architecture industry as well, as one of the hardest hit sectors still struggles to recover from its worst collapse on record, according to numbers released by the AIA yesterday. The Architecture Billings Index posted its second month of gains in July, but given that this was preceded by a two-month fall in the index, the AIA is guarded about reading too much into the latest numbers.

The AIA Architecture Billings Index for the past 18 months: Billings (Blue) and Inquiries (Red). (Click to zoom)
Regional Billings: Northeast (Blue), Midwest (red), South (green), West (purple).
Sector Billings: Multi-Family Housing (Blue), Commercial/ Industrial (Red), Institutional (green), Mixed-Use (purple).

“We had a two month hiatus, basically, and we’re back on track now but still not where we want to be,” AIA Chief Economist Kermit Baker said.

Billings for firms surveyed by the AIA rose to 47.9 in July, up from 46.0 in June and 45.8 in May, though still short of the two-year high reached in April, when billings hit 48.5. Solace could also be taken from the fact that this is the second highest reading in the index since January 2008. Inquiries for new work fell, however, to 53.1 from 57.7, reaching their lowest level since February.

“Until we’re there, let’s not get too excited,” Baker cautioned.

The one bright sign remains the commercial and industrial sector, which had its third month of positive growth, at 50.4, though it had slipped from 50.6 in June and 51.3 in May. It is also the only billings indicator to have been above the coveted 50 threshold for more than two months. (A reading above 50 means that billings are rising, below 50 means they are falling, and the greater the range, the greater the rate of growth or decline.)

Baker’s explanation for the strength of the sector is a mixed blessing. “We’ve seen a dramatic fall in commercial design activity and commercial construction activity,” he said. “It’s kind of easier to bottom out when you’ve fallen so much. Maybe this is the floor it can build off of.”

The institutional sector had the best performance in July, rising nearly three points to 47.9 from 45.0 in June—a good sign given that institutional work, which has suffered throughout this recession, may be returning to its typical role as a mainstay during downturns. Multi-family housing also performed well, reaching 47.5 from 46.5, though it has yet to return to the positive territory it saw in the winter. And mixed-use work, after an impressive April at 48.4, continues its decline, dropping to 42.9 from 44.7 in June.

Regionally, no part of the country is showing strength, as had been the case earlier in the year. Both the Northeast and Midwest continued their slide from when each spent a brief period above the 50 mark, with the former dipping slightly to 47.2 in July from 47.7 in June and the latter holding steady at 46.7. The South is having a bit of a rally, however, rising to the top of the list at 47.9, up from 46.7 in June and 45.9 in May, though it has yet to go higher. And the West continues to be the laggard, as it is it has suffered California’s economic woes, though it did see gains in July, rising to 45.2 up from 43.6 in June.

The industrial sector’s “three months above 50 are encouraging,” Baker said. “Otherwise, there’s nothing on the sector or regional side that is that worth discussing in terms of positive trends.”