ABI Closes 2019 With Growth

Architecture firm billings growth softened in December, but remained positive for the 15th consecutive month, according to a new report released by the American Institute of Architects (AIA). AIA’s Architecture Billings Index (ABI) score for December was 50.4 compared to 54.7 in November. Despite the positive billings, a softening in growth was seen across several regions and sectors, as well as in project inquiries and design contracts.

“Given the concerns over the ongoing tariff situation, it is not surprising to see a bit of a slowdown in progress on current projects,” says AIA chief economist Kermit Baker. “Growing anxiety over unstable business conditions and the partial shutdown of the government may lead to further softening in the coming months.”

New construction starts in December fell 10 percent to a seasonally adjusted annual rate of $708.9 billion, continuing to retreat after November’s 7-percent decline, according to Dodge Data & Analytics. The December downturn reflected diminished activity for each of the three main construction sectors.

Nonresidential building dropped 14 percent, as its commercial building segment lost momentum following its heightened November amount. Residential building pulled back 8 percent, due to reduced activity in December for both single-family and multifamily housing. Nonbuilding construction decreased 9 percent, with a steep plunge by the electric utility/gas plant category that outweighed a December rebound for public works.

For 2018 as a whole, total construction starts increased a slight 0.3 percent to $789.0 billion. This came after 7-percent gains in both 2016 and 2017. as well as 11~percent to 14~percent gains from 2012 through 2015.

The Dodge Momentum Index fell 4.9 percent in December to 151.9 (the year 2000 = 100) from the revised November reading of 159.7. 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 nonresidential buildings by a full year.

The decline in December was due to a 7.6-percent drop in the commercial component of the momentum index, while the institutional component fell 0.7 percent. For the full year, the index gained 4.3 percent with the institutional component increasing 8.5 percent over the year and the commercial component moving 1.6-percent higher.

While the overall index registered a gain for the full year, this was realized in the first half of 2018. During the final six months of the year, it fell 4.4 percent, with the commercial component losing 7.2 percent and the institutional component remaining essentially flat. This suggests that spending for commercial buildings may be reaching its cyclical peak.

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