Industry Outlook September 2021

Architecture Billings Continues to Climb

The Architecture Billings Index (ABI) recorded its sixth consecutive positive month in July, according to a report from the American Institute of Architects (AIA).

The ABI score for the month was 54.6. While this was down slightly from June’s score of 57.1, it still indicates very strong business conditions overall (any score above 50 indicates an increase in billings from the prior month). Scoring for new project inquiries also declined in July, but remained near its all-time high at 65.0. The score for new design contracts was essentially unchanged from June to July with a score of 58.0.

The regional and sector categories are calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

Dodge Momentum Index Pulls Back in July

The Dodge Momentum Index fell to 155.8 (2000=100) in July, a 6% decline from the revised June reading of 164.9. The Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for non-residential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.

Both components of the Momentum Index fell in July. Commercial planning fell 3%, while institutional planning dropped 9%.

The Index posted strong gains through much of the winter and spring as the economy and building markets began to stabilize following the recession. While the economy has continued its progress through the summer, the Index has regressed somewhat as higher material prices and skilled labor shortages continue to exert a strong influence over the construction sector. Despite the declines in June and July, the Momentum Index remains near levels last seen in 2018. Compared to a year earlier, the Momentum Index was 25% higher than in July 2020.

Total Construction Starts Move Lower in July

Total construction starts fell 3% in July to a seasonally adjusted annual rate of $854.8 billion, according to Dodge Data & Analytics. There were few bright spots during the month, with all three sectors (residential, nonresidential building and nonbuildings) moving lower in July.

Nonresidential building starts fell 1% in July to a seasonally adjusted annual rate of $283.8 billion. Commercial starts lost 19% during the month as starts pulled back in the warehouse, office and retail sectors, while hotel starts rose. Institutional starts rose 11% during the month due to gains in healthcare, recreation and transportation, while education starts fell. Through the first seven months of 2021 nonresidential building starts were 4% higher when compared to the first seven months of 2020. Commercial
starts were up 5% and institutional starts were 1% lower.

For the 12 months ending July 2021, nonresidential building starts were 8% lower than the 12 months ending July 2020. Commercial starts were down 8%, while institutional starts fell 5%. Manufacturing starts dropped 26% in the 12 months ending July 2021.

Residential building starts fell 6% in July to a seasonally adjusted rate of $400.0 billion. Single family starts lost 6% in July, while multifamily starts dipped 4%.

For the 12 months ending July 2021, total residential starts were 23% higher than the 12 months ending July 2020. Single family starts gained 29%, while multifamily starts were up 8% on a 12-month sum basis.

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