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 a Bubble?5 Views
Finance allah shmoop what is ah bubble All right well
this is a bubble See what happened there got bigger
and bigger and bigger And then it popped and here's
the stock market from about nineteen Ninety two until about
two thousand It got bigger and bigger and bigger And
then it popped And yet was a bubble not just
a big fat bull market It was a crazy ludicrous
tulip mania Kind of time like start ups with almost
no revenues trading and billions of dollars Yep And tulip
mania That was a really thing One tulip sold for
forty grand go figure wasn't like if you ate it
you lived forever So yeah it was a bubble So
what caused the ninety nine bubble Well greed and it
wasn't good At least for some The internet had come
along It was a new thing consumers by the millions
could download in the privacy of their homes Art films
Yeah That's what we'll call them art films by the
terabyte money was flowing from silicon valley investors into startups
at record pace hoping to take advantage of this new
amazing internet thing and the valuations of companies got higher
And higher and higher Nasdaq went up some four hundred
percent in just half a dozen years and the blessed
cos traded at one hundred times trailing revenue not earnings
but revenue So if you think about the idea that
if you invest a dollar and you want to get
more than that back and that dollar comes from profits
of companies than one hundred times revenues cos we're probably
something like five hundred times earnings or more So for
one hundred dollars oven investment you've got like a dollar
of revenues in twenty cents of potential earnings Like maybe
a a decade later maybe yeah that's a bubble and
it burst At least you don't have that danger with
actual tulips or bitcoins Yeah they take bitcoins when you
buy tulips Would be kind of a good marriage there
Up Next
What is economic cyclicality (“boom or bust”)? Economic cyclicality and “boom or bust” cycles refer to the periods of success or decline th...
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...
What is speculation? Speculation refers to a high risk, high reward scenario in investing. When an investor engages in a speculation, they take on...