What is the architectural billings index? How does it inform investments?
What is the architectural Billings Index?
The Architectural Billings Index (ABI) is a monthly economic indicator for nonresidential construction activity, with lead times of approximately 9-12 months. Data is gathered through a survey conducted by The American Institute of Architects (AIA) that analyzes shifts in billings from architectural firm leaders.
Like other economic indicator indexes, an Architectural Billings Index reading over 50 shows an increase in firm billings, while a reading below 50 shows a decrease. Readings above 50 suggest both consumers and businesses’ confidence in the economy as increases in billings mean there is greater demand for design services and construction.
Why is the Architectural Billings Index valuable?
The Architectural Billings Index increases visibility into business cycle shifts, highlights opportunities for expansion and tracks changes in the market. It’s a vital tool for business decision makers in the architecture and construction industries looking to manage budgets and find business leads. Investments groups, media outlets, and within the design and construction industry use the ABI to prepare for market fluctuations.
Additionally the ABI breaks down 3 month rolling averages of firm billings by region and sectors, including commercial/industrial, institutional, multifamily residential, and mixed practice. Knowing where growth is happening and what money is being spent on can help you plan for market demand.
What should you do?
Watching the Architectural Billings Index will highlight where demand for design services and construction is within sectors of the nonresidential construction industry. When demand is higher this most likely indicates confidence in the current economic situation. Understanding what sectors are increasing design demand can provide insight into what sectors are experiencing the most growth. Majestic’s CORE Report follows the Architectural Billings Index; along with other indicators every week to see where the market stands.