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Architectual Billings Drop, Construction Spending Holds Relatively Steady in January


March 1 — The Architectural Billing Index (ABI) of the American Institute of Architects (AIA) suffered a sharp decline in January, suggesting little improvement in construction spending, at least for the remainder of the year.

Meanwhile, construction spending as estimated by the U.S. Commerce Department slipped just 0.6% for January compared to the previous month.

The ABI is considered a nine- to twelve-month leading indicator of construction activity. The January index rating of 42.5 was nearly three points below December's 45.4 figure. Any score under 50 indicates a declining demand for architectural services.

U.S. construction spending in January was at a seasonably adjusted rate of $884.1 billion, some $5 billion lower than in December, the Commerce Department reported. The January figure is 9.3% below the estimate of one year ago.

Said Kermit Baker, AIA chief economist, "Projects are being delayed or cancelled because lending institutions are placing unusually stringent equity requirements on new developments. This is even happening to financially sound companies with strong credit ratings.

"This serious situation is being compounded by a skittish bond market, decreased tax revenues for publicly financed projects and declining property values — all which serve as deterrents for construction activity. Until these factors are resolved, the design and construction industry — which accounts for roughly 10% of GDP and is facing unemployment figures in excess of 20% — will continue to face deteriorating market conditions," he added.

Read the AIA news release.

Read the Commerce Department news release.