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Far From Over

Far From Over

Despite growing sentiment that the recession gripping the world economy is most likely over, the architecture industry continues to suffer with no strong signs of growth over the past six months. During that period, the AIA’s Architecture Billings Index has yet to record any significant growth in payments to architects, with billings slipping 1.5 points for the month of August.

“We’re stuck in slow decline mode,” Kermit Baker, the AIA’s chief economist, said in an interview. “Firms are telling us business is still deteriorating but deteriorating very slowly.” Baker expects an equally plodding recovery.

In August, nationwide billings fell to 41.7 from 43.1. A reading above 50 means payments to firms are rising while any number below means they are falling. Starting in January, the index began to rally from the low 30s, but it has gyrated in the low 40s since March, even dipping into the high 30s in June. “I don’t read too much into a one-and-a-half point decline,” Baker said. “I look at this as we’re six months into no growth.”

Inquiries for new work took a big jump, however, to 55.2 from 50.3, reversing a four-month decline. But because inquiries have hovered in the mid-50s since March with no comparable rise in billings, Baker has begun to regard inquiries not as a leading indicator of work to come, as it has been in the past, but simply as a sign that clients are not yet ready to kick off new projects or are casting a wider net to take advantage of the depressed markets.

Oddly enough, most regional and sector indicators are up, if only slightly, but Baker explains that this is because they are calculated on a three-month rolling average due to a smaller sample size.

The Northeast and Midwest have made considerable gains, respectively, to 45.2 from 37.8 and 43.0 from 36.9. The South increased slightly to 44.1 from 43.4, while the West continues to languish, dropping more than two points to 37.5 from 39.7. Meanwhile, multi-family residential work is up slightly to 43.4 from 40.7, as is commercial/industrial, reaching 45.6 from 42.9. Institutional work rose meagerly to 37.5 from 47.1, though this is a reversal of a five-month decline. And mixed-use work slipped to 41.4 from 42.9.

While things still look bleak, Baker noted that a few areas, such as the Northeast, Midwest, and commercial/industrial work are all within striking distance of positive territory. Were they to cross that threshold, Baker said, “then there might actually be room for celebrating.”

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