Architecture Billings Index - ABI

  

Categories: Real Estate, Investing

No, the Architecture Billings Index does not track the number of stories on the tallest building in Billings, Montana. We're guessing that ABI has been holding steady at 5 for a few decades now (nope, we just looked it up: tallest building in Billings is the First Interstate Center and its 20 stories tall).

In the world of finance, the ABI provides a leading indicator of construction activity. It is put out each month by the American Institute of Architects. The index combines survey data related to billings (no, not that Billings again...as in bills sent out) by architecture firms. Basically, a high number of billings suggests that people are hiring a lot of architects.

Since the first step of building something is to have an architect design it, a high level for the ABI suggests the likelihood of strong construction activity down the road. The AIA estimates that the index provides a lead time of about 9 to 12 months, meaning a rise in the ABI is correlated with higher construction activity 9 to 12 months down the road.

The index is used to measure nonresidential construction, or projects that involve something else than places for people to live (like houses or apartment buildings).

Related or Semi-related Video

Finance: What is economic cyclicality ("...13778 Views

00:00

Finance allah shmoop What is economic cyclicality All right Well

00:07

if you looked at the history of growth and decline

00:10

in the u s economy you think it was run

00:13

by a bunch of knuckleheads Meat would poop and poop

00:16

all in congress Now surprisingly o r maybe not In

00:20

fact economic cyclicality is a reflection of resource glut and

00:25

then scarcity and the willingness of buyers Teo you know

00:29

buy stuff that is when times were good consumers and

00:31

businesses by things hire workers consume commodities at office space

00:36

and factories until there is a shift in tastes and

00:40

sentiment You know like the horse industry before henry ford

00:43

came along anyway Sometimes the shift that triggers an economic

00:47

cycle comes from the government like when times air too

00:50

good there's usually rampant inflation People in companies will simply

00:54

choose to just pay up the extra two bucks a

00:56

foot to a rent office space The company can pass

00:59

on that extra cost by raising its prices to customers

01:02

from eighty dollars a year to ninety dollars and nobody

01:05

will notice until they do Yeah the government wanted desperately

01:08

to cool inflation in the nineteen seventies so the fed

01:12

raised short term borrowing rate costs dramatically from somewhere in

01:16

the three to four percent range to closer to like

01:18

ten percent And the cost of renting money became so

01:21

expensive And because companies were highly leveraged borrowing money to

01:26

build factories and hire workers and expand that well then

01:30

everything contracted with leverage right So they had all this

01:33

debt and revenues went down They still to pay the

01:35

dead and well that was a bad scene So inflation

01:38

was contained at the cost of a vastly cooler economy

01:42

So things contract then like a scared turtle or a

01:46

you know like when it do jumps in a cold

01:49

ocean and all right But then eventually one brave alligator

01:52

emerges to see if it concrete's back up under the

01:56

top of the food chain and eat some chickens or

01:59

dear Whatever alligators eat what do they eat anyway And

02:03

the consumer starts buying things adding risk rever been reducing

02:07

it and the cycle takes off again gets picture You

02:10

know it's the circle the circle of life round and

02:13

round It goes where it stops Well actually we do 00:02:15.523 --> [endTime] know Circle of economy

Up Next

Finance: What is a Business Cycle?
3 Views

What is a Business Cycle? A business cycle refers to the ups and downs in GDP or output over a period of time. Business cycles show times when the...

Finance: What is a Bubble?
5 Views

What is a Bubble? In markets and economic cycles, any kind of rapid run up trend characterized by over exuberance and emotion over fundamentals tha...

Finance: What is speculation?
6 Views

What is speculation? Speculation refers to a high risk, high reward scenario in investing. When an investor engages in a speculation, they take on...

Find other enlightening terms in Shmoop Finance Genius Bar(f)