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On Brexit Vote Eve, the Architecture Billings Index Says 'Better Days Ahead for Construction'

WASHINGTON, DC--What could be behind this sharp increase in forward-looking project billings? GlobeSt.com has some thoughts.

By Erika Morphy | erikamorphy | | Updated on June 23, 2016
Kermit Baker Kermit Baker
 

WASHINGTON, DC–In what surely was an accident of timing, the American Institute of Architects released its Architecture Billings Index (ABI) on the eve of the UK’s European referendum vote. The vote, being held today, is too close to call and global markets widely fear the consequences should the UK decide to break away from the EU. Indeed, this vote is being closely watched by the Federal Reserve and is likely one reason why it opted not to raise interest rates this month.

Yet, here is the ABI with its May reading of 53.1 — a sharp increase from the 50.6 reading of the previous month — which is its highest score in close to a year.  An even bigger jump was posted by the new projects inquiry index. It was 60.1 last month, up from a 56.9 in April.

 It gets even better. With the release of the score, AIA Chief Economist Kermit Baker said that demand levels are solid across the board for all project types at the moment. (Baker was not available to speak to GlobeSt.com). Of particular note, he added:

The recent surge in design activity for institutional projects could be a harbinger of a new round of growth in the broader construction industry in the months ahead.

It is important to say here that this is not an industry sentiment survey — to be sure, these have value, but they are not leading economic indicators. The ABI, however, is a leading economic indicator albeit not a government one. It reflects  a nine to twelve month lead time between architecture billings and construction spending with anything over a 50 indicating that design services billings will increase.

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