U.S. architecture firms continued to operate in a challenging business environment in August, with billings declining for another month as high financing costs and persistent inflation weighed on new project activity.
The AIA/Deltek Architecture Billings Index (ABI) registered 47.2 in August 2026, below the 50-point threshold that separates growth from contraction. While the share of firms reporting declining billings eased slightly from July, the overall direction of business conditions remained negative. The ABI is considered a leading indicator for nonresidential construction activity, typically providing a nine- to 12-month look ahead.
The pipeline offered limited encouragement. Inquiries for new projects posted a modest increase, with the project inquiries index reaching 50.8, but the value of newly signed design contracts continued to contract, registering 48.3. The divergence suggests that interest from potential clients is not yet translating into sufficient new contracted work for many firms.
Regional conditions varied considerably. The Midwest returned to modest growth, posting a three-month moving average of 50.7, its first reading above 50 in nearly a year. The West was essentially flat at 49.8, while the South remained in decline at 46.1. The Northeast recorded the weakest performance, falling to 40.7, its lowest level since 2020.
Performance also differed by project specialization
- Commercial/industrial: 50.4 — modest growth
- Multifamily residential: 47.8 — declining
- Institutional: 47.0 — declining
- Mixed practice: 42.5 — declining
Expectations for the months ahead have also weakened. The share of firm leaders expecting billings to decline in the coming quarter increased from 21% at the end of the first quarter to 29% at the end of the third quarter, indicating growing caution about near-term business conditions.
The broader economic backdrop remains unsettled. Architectural services employment increased by 700 positions in July, but inflation accelerated in August. The Consumer Price Index rose 0.4% from July, compared with a 0.1% increase the previous month, and was up 3.4% from a year earlier, with gasoline and energy prices among the largest contributors.
“Architecture firms are caught between stubborn inflation and higher borrowing costs,” said AIA Chief Economist Richard Branch. “The Federal Reserve’s latest rate increase may help ease inflationary pressures over time, but in the near term it adds another headwind for projects already facing a difficult financing environment.”
For architecture firms, the August data point to continued pressure on billings and project conversion as financing costs, inflation and broader economic uncertainty remain important constraints on new development activity.
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