Industry Outlook

ABI Continues its Streak of Soft Readings

Demand for design services in July remained essentially flat compared to the previous month, according to a new report released from the American Institute of Architects (AIA).

AlA’s Architecture Billings Index (ABI) score of 50.1 in July showed a small increase in design services since June, which had a score of 49.1. Any score above 50 indicates an increase in billings. In July, the design contracts score dipped into negative territory for the first time in almost a year. Additionally, July billings softened in all regions except the West, and at firms of all specializations except multifamily residential.

“The data is not the same as what we saw leading up to the last economic downturn but the continued, slowing across the board will undoubtedly impact architecture firms and the broader construction industry in the coming months,” says AIA chief economist Kermit Baker. “A growing number of architecture firms are reporting that the ongoing volatility in the trade situation, the stock market and interest rates are causing some of their clients to proceed more cautiously on current projects.”

Dodge Momentum Index Descends in July

The Dodge Momentum Index retreated 4.6% in July to 138.9 (the year 2000 = 100), down from the revised June reading of 145.6. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning. The lower reading for the index in July was due to a 10.2% pullback by its institutional segment following a 6% increase in June. The commercial segment in July was basically flat, slipping a slight 0.3%.

After peaking in July 2018, the index has generally receded, with the latest month’s drop consistent with that trend. Compared to a year ago, the Momentum Index in July 2019 was down 11.6%, with its commercial segment down a steep 17.4% and its institutional segment down a relatively modest 1.8%. Much of the decline for the index over the past year took place during the latter half of 2018, as December was reported 10.6% below the July 2018 peak. Since then, the descent for the index has been more gradual, with the July 2019 reading down just 1.2% from last December.

July Construction Starts Increase 2 Percent

At a seasonally-adjusted annual rate of $849.6 billion, new construction starts in July advanced 2% from the previous month, according to Dodge Data & Analytics. This marked the third consecutive monthly increase for total construction starts, following gains of 10% in May and 9% in June.

By major sector, nonbuilding construction led the way in July with a 24% hike, boosted by several large public works and electric utility/gas plant projects. Nonresidential building in July settled back 4%, following a 16% jump in June. Residential building in July slipped 6%, as multifamily housing retreated from its elevated June amount.

Through the first seven months of 2019, total construction starts on an unadjusted basis were $459.3 billion, down 6% from the same period a year ago.

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