Architecture Billings as a Leading Indicator of Construction

Analysis Of The Relationship Between A Billings Index And Construction Spending

Baker By Kermit Baker and Diego Saltes

Kermit Baker is the chief economist for the American Institute of Architects in Washington, D.C. He is also the project director of the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University. Previously, he was vice president and director of the economics department at Reed Business Information.

Saltes Diego Saltes is the director of economics and market research at the American Institute of Architects in Washington, DC. Previously, he was an economist for the American Trucking Association. He has a M.S. (with honors) in international economics and a bachelor’s degree in economics (cum laude) from Radford University.

Due to the size and cyclicality of construction, a premium is placed on accurately predicting nonresidential construction trends, particularly at turning points in the construction cycle. Given that construction decisions are made by hundreds of thousands of businesses, nonprofit institutions, and government organizations, it is extremely difficult to get comprehensive information on building plans. However, since architects design the overwhelming majority of nonresidential construction projects, gathering information on billings at architecture firms provides leading information on future construction trends. Statistical analysis demonstrates that information provided by architecture firms on trends in their billings is highly correlated with the eventual nonresidential construction activity, with leads of up to one year.

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