October Architecture Billings Index reports considerable decline after twenty months of consecutive growth

Down and Dropping?

October Architecture Billings Index reports considerable decline after twenty months of consecutive growth

(Guillaume TECHER/Unsplash)

After reporting its twentieth consecutive month of growth in September, the American Institute of Architect’s (AIA) Architecture Billings Index (ABI) has, to put it lightly, “softened considerably” for the first time since January 2021. The October index reported a score of 47.7—any score higher than 50 indicates growth from the previous month, while a lower score indicates a decline in billings—suggesting demand for design services across the country is on the decline as the year closes out and inflation is finally beginning to wane.

Despite growth for the better part of the last year and half, most recently with September’s score of 51.7 and August’s steady 53.3, the decline comes at little surprise considering that economic uncertainty has long been looming.

“Economic headwinds have been steadily mounting, and finally led to weakening demand for new projects,” AIA Chief Economist Kermit Baker said in a press release.

While the overall score has dipped, new project inquiries in October reported growth, with a score of 52.3, down from 53.6 in September and a robust 57.9 in August. The value of design contracts also dropped to 48.6. In recent months, the ABI has reported on the strong backlog of projects at firms that came in during the pandemic recovery. Baker predicts this accumulation of work will keep architects busy and in business for the foreseeable future.

“Firm backlogs are healthy and will hopefully provide healthy levels of design activity against fewer new projects entering the pipeline should this weakness persist,” he explained.

Each month the index releases regional- and sector-specific scores, pulling survey data from responding firms that are weighed against the previous month to determine whether there is a growth or decline in billings. Last month, the Northeast reached its “highest pace of growth” in recent years at a score of 54.6; for the month of October, the score dipped to 50.3, still indicating growth, but with slowing demand. Both the Midwest and the South also reported slowing growth with scores of 50.8 and 50.6, respectively. The West was the sole region to report a score under 50, coming in at 49.6. This is down considerably from the summer months, notably in June when the score reached a solid solid 57.8.

As indicated in last month’s report, the billings increase that followed the post-pandemic recovery was only temporary. In September, residential and commercial/industrial projects reported a decline in billings with scores of 47.9 and 49.6, respectively, and have again dropped to 46.1 for residential and 45.9 for commercial/industrial projects. The institutional sector is again the strongest, reaching its highest pace of growth in several years last month with a score of 58.9. It remains strong coming in at 54.3 for October. Mixed practice also reported an increase in billings at 50.8.

Despite the continued reports of growth,  the prospect of an economic downturn has threatened the industry for the better part of the last few months. Has that time finally come? Tune in again next month to find out.