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Steepest rate in 18 months

Architecture billings index drops for 5th straight month

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WASHINGTON -- Business conditions for architects have fallen into a steep decline and may not yet have reached bottom, according to the American of Architects (AIA).

The decline also does not bode well for future construction spending.

Following a drop of almost a full point in June, the Architecture Billings Index (ABI) fell again by more than a point in July and is in the steepest decline in a year-and-a-half.

As a leading economic indicator of construction activity, the ABI reflects the approximate nine- to 12- month lag time between architecture billings and construction spending.

The AIA reported the July ABI score was 45.1 -- the steepest decline in billings since February 2010 -- after a reading of 46.3 the previous month.

This score reflects a continued decrease in demand for design services (any score above 50 indicates an increase in billings).

The new projects inquiry index was 53.7, a considerable slowdown from a reading of 58.1 in June.

“Business conditions for architecture firms have turned down sharply,” said AIA Chief Economist Kermit Baker.

“Late last year and in the first couple of months of this year there was a sense that we were slowly pulling out of the downturn, but now the concern is that we haven't yet reached the bottom of the cycle," he said.

"Current high levels of uncertainly in the economy don't point to an immediate turnaround,” Baker concluded.

Regional billing averages were highest in the South at 46.9, and lowest in the Midwest at 44.9.

In between were the West region at 46.6 and the Northeast at 46.4.

The sector index breakdown showed commercial/industrial billings the highest at 47.9, institutional billings at 47.2, mixed practice at 47.1 and multi-family residential last at 44.7.

The project inquiries index was at 53.7.

The ABI, produced by the AIA Economics & Market Research Group, is an economic indicator that provides an approximately nine- to 12-month glimpse into the future of nonresidential construction spending activity.

The diffusion indexes are derived from a monthly “Work-on-the-Boards” survey that is sent to a panel of AIA member-owned firms.

Participants are asked whether their billings increased, decreased or stayed the same in the month that just ended as compared to the prior month, and the results are then compiled into the ABI.

These monthly results are also seasonally adjusted to allow for comparison to prior months.

The monthly ABI index scores are centered around 50, with scores above 50 indicating an aggregate increase in billings, and scores below 50 indicating a decline.

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