Architecture Billings Index Ends Year Positive

Demand for design services in December increased for the third month in a row, according to a report from The American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score of 52.5 for December reflects an increase in design services provided by U.S. architecture firms (any score above 50 indicates
an increase in billings). The new project inquiries and design contracts scores were 58.7 and 53.4, respectively.

“Despite the ongoing slowdown in billings in the Northeast, balanced growth across sectors and regions looks more positive for the coming year,” says AIA chief economist, Kermit Baker. “Factors outside of the construction sector, such as trade policy and international events, could still impact demand for design services, however
recent fears about a downturn in construction activity have largely subsided.

Dodge Momentum Index Moves Higher in December

The Dodge Momentum Index increased 1.5% in December 2019 to 156.2 (the year 2000 = 100) from the revised November reading of 153.9. 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. Both components of the Momentum Index rose over the month—the institutional component gained 2.3%, while the commercial component rose 0.9%.

For 2019, the Momentum Index averaged 141.9, a decline of 3.7% from 2018’s average. In 2019, the commercial component was 2.3% lower than the previous year, while the institutional component dropped 5.9%. Last year’s slip in the dollar value of projects entering planning suggests that construction spending for non-residential buildings could see a setback in the year to come. However, the Momentum Index did end the year on a high note indicating that a decline in 2020 construction is likely to be modest in nature.

Construction Starts Fall 21 Percent in December

Total construction starts in December 2019 dropped 21% from the previous month to a seasonally adjusted annual rate of $800.4 billion. The sharp decline was largely a response to hefty gains posted in November’s utility and manufacturing sectors. When removing the influence of these two volatile sectors, total construction starts only fell 3% in December. By major sector, nonresidential building starts fell 20% in December, while nonbuilding starts dropped 41% and residential starts lost 4% over the month.

For the full year, total construction starts were essentially flat when compared to 2018 at $817.6 billion. In 2019, nonbuilding starts gained 7% due to large gains in utility starts, while nonresidential starts fell 1% and residential starts declined 3%. Removing the massive 112% gain in utility starts from the total would result in total construction declining 3% from the previous year.

Nonresidential building dropped 20% from November to December 2019 to a seasonally adjusted annual rate of $289.5 billion. Institutional starts rose 6% over the month
fueled by gains in healthcare and recreation. Commercial starts rose 5% in December due to solid gains in warehouses and parking structures.

For the full year, nonresidential building starts fell 1%. Commercial building starts rose 6% last year due to gains in warehouses and offices, while institutional starts fell 5% with activity in all major categories seeing a pull back. Manufacturing starts fell 15% in 2019.

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