The Architecture Billings Index (ABI) is a familiar and closely watched metric in the construction industry due to its correlation to construction activity with a lead time of between 9 and 12 months. It’s derived from a monthly survey of architectural firms conducted by The American Institute of Architects (AIA). A score above 50 indicates an increase in billings from the previous month, while a score below 50 indicates a decrease in billings. Anything above 50 is often translated as an indicator of expanding construction spending in 9-12 months, while scores below 50 are read as contracting construction spending in 9-12 months.

From October 2022 to April of 2023, six months produced scores below 50 scores before pulling back up into expansionary territory with three consecutive months above 50. However, in August the ABI dipped below 50 again and our last data point, September 2023, was the lowest score seen since December of 2020.

Does that mean that the worst is still to come? Not necessarily. To be sure this reflects tighter economic conditions. Rates are high and private funding and investment is getting harder to come by. Though material price growth has slowed, the absolute values are still much higher than what we saw three years ago. The chief economist for the AIA, Kermit Baker, says the report, “shows the hesitance among clients to commit to new projects.”

Though these are certainly headwinds for the industry, there are reasons to remain hopeful about the future.

Architectural backlogs are slimming down but are still relatively healthy at 6.5 months’ worth of work. The data also shows there were pockets of improvement, like the increase in billing for the surveyed firms focusing on institutional projects. Additionally, the gains we’ve had in manufacturing construction that came from programs like the CHIPS Act have been made on the promise of funding that we are still waiting on. Once it starts, we will likely see more projects in that sector get approved and make their way through the design stage, boosting ABI values.

While we do expect to see further slowing of the economy in 2024, experts view the slump as more modest and shorter-lived than many of the more recent business-cycle troughs that we’ve experienced, ending with an economy that should be ready to start firing on all cylinders again shortly afterward.