Industry Outlook

ABI Moderate in February

Architecture firm billings growth softened in February but remained positive, according to a report from the American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score for February was 50.3, down from 55.3 in January. Indicators of work in the pipeline, including inquiries into new projects and the value of new design contracts, remained positive.

“Overall business conditions at architecture firms across the country have remained generally healthy,” says AIA chief economist Kermit Baker. “Firms in the South recorded continued strong design activity, likely reflecting a healthy regional economy and ongoing rebuilding from the catastrophic 2018 hurricane season.”

At a seasonally adjusted annual rate of $697.4 billion, new construction starts in February 2019 dropped 3 percent from the previous month, according to Dodge Data & Analytics. The February decline returned construction starts to the downward path that emerged during the closing months of 2018.

Two of the three main construction sectors registered weaker activity in February – non-building construction fell 8 percent, due to a pullback by its public works segment, while residential building slipped 3 percent. Meanwhile, nonresidential building in February was able to hold steady with its January pace. During the first two months of 2019, total construction starts on an unadjusted basis were $99.3 billion, down 12 percent from the same period a year ago.

On a 12-month moving total basis, total construction starts for the 12 months ending February 2019 were able to remain essentially even with the corresponding amount for the 12 months ending February 2018.

The Dodge Momentum Index lost 4.4 percent in February
2019, falling to 146.9 (the year 2000 = 100) from the revised January reading of 153.6. The momentum index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for non-residential buildings by a full year. Both components of the momentum index lost steam in February; the institutional component moved 5.9-percent lower, while the commercial component dropped 3.4 percent.

Since November, the index has re-established a sawtooth pattern that’s often been present in recent years. It’s also become clear that the average level of activity has downshifted slightly since the summer of 2018. From April through August of last year, the average level of the momentum index was 158.6, while from September through the latest month the average is 150.3—a decline of 5.2 percent. This shift continues to suggest that the growth in construction activity will moderate over the coming year.

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