August Sees Decline in Architecture Billings

Demand for design services in August took a markedly downward swing compared to July’s already soft score, according to a new report from the American Institute
of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score of 47.2 in August showed a significant drop in architecture firm billings compared to the July score of 50.1. Any score below 50 indicates a decrease in billings. The design contracts score also declined to 47.9 in August, representing a rare dip for this indicator. Billings in the West stayed modestly positive while all other regions remained in negative territory.

“The sizeable drop in both design and new project activity, coming on the heels of six months of disappointing growth in billings, suggests that the design expansion that began in mid-2012 is beginning to face headwinds,” says AIA chief economist Kermit Baker. “Currently, the weakness is centered at firms specializing in commercial/industry facilities as well as those located in the Midwest. However, there are fewer pockets of strength in design activity now, either by building sector or region than there have been in recent years.”

Dodge Momentum Index Moves Lower in August

The Dodge Momentum Index dropped 1.3% from July to August to 137.8 (the year 2000 = 100) from the revised August reading of 139.6. 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 drop in September was the result of a 16.6% decline in the institutional component, offsetting a 9.1% gain in the commercial component.

On a year-over-year basis, the overall momentum index is 10.3% below August 2018, suggesting that construction spending will be settling back as the year progresses. However, most of the decline occurred in 2018 – the momentum index has lost only 1.8% since the beginning of 2019, indicating that while construction activity will ease it is not in a freefall. On a year-over-year basis, the institutional component is 22.5% lower, while the commercial component is down 2.4%.

August Construction Starts Decrease 6 Percent

New construction starts dropped 6% over the month in August to a seasonally adjusted annual rate of $807.1 billion, according to Dodge Data & Analytics. August’s decline breaks a string of three consecutive month-to-month gains. By major sector, nonbuilding construction fell 15% in August, reversing the large increases made in the previous month when several notable projects started. The declines in residential and nonresidential building were milder—falling 1% and 3% respectively in August.

Year-to-date through eight months, total construction starts were 5% lower than the same period a year ago due to declines in residential and nonresidential buildings. Non-building activity was 3% higher.

Nonresidential building starts dropped 3% from July to August, to $283.9 billion (at a seasonally adjusted annual rate). Commercial construction starts rose 7% in August to $135.2 billion (annual), the result of increases in offices and warehouses. Institutional starts rose 2% in August to $138.2 billion (annual) due to increases in health and education facilities.

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