ABI’s Downward Trajectory Slows

Demand for design services in May saw few signs of rebounding following a record drop in billings the month prior, according to a report from the American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score for May was 32.0 compared to 29.5 in April, but still represents a significant decrease in services provided by U.S. architecture firms (any number below 50 indicates a decrease in billings). In May, the decline in new project inquiries and design contract scores moderated from April, posting scores of 38.0 and 33.1 respectively.

“A large portion of the design and construction industry remains mired in steep cutbacks as many businesses and organizations are still trying to figure out what actions make sense in this uncertain economic environment,” says AIA chief economist Kermit Baker. “There are growing signs of activity beginning to pick up in some areas, but others are seeing a pause as pandemic concerns continue to grow.”

Dodge Momentum Index Flat in May

The Dodge Momentum Index moved a scant 0.1% lower in May to 129.2 (the year 2000 = 100) from the revised April reading of 129.4. The commercial component of the Momentum Index rose 1% during the month, while the institutional component dropped 1.9%.

The resilience of the Momentum Index over the last two months has been remarkable in the face of the COVID-19 crisis and resulting economic recession. With May’s reading, the Momentum Index is down 17% from its most recent peak in July 2018. During the Great Recession, by contrast, the peak-to-trough decline was  62%. While the Momentum Index may move lower in the future, its present level continues to suggest that there are enough projects entering planning to allow construction to begin a modest recovery in the third quarter.

In May, 11 projects each with a value of $100 million or more entered planning.

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.

Construction Starts Post Small Gain in May

Total construction starts rose 3% from April to May to a seasonally adjusted annual rate of $595.1 billion, following a 25% decline the previous month. Several large nonresidential building projects broke ground in May resulting in the gain. Removing those large projects from the statistics would have resulted in no change in starts over the month. In May, nonresidential buildings increased 8%, while residential building starts rose 4%. Nonbuilding starts, however, declined 4% during the month.

Through the first five months of 2020, total construction starts were 12% lower than in the same period in 2019. Nonresidential starts were down 19%, nonbuilding starts were 16% lower and residential starts were off 3%. For the 12 months ending May 2020, total construction starts were down 1% from the same period a year earlier. Residential buildings were 1% higher and non-building starts were up 5%. Nonresidential starts, however, were 7% lower for the 12 months ending May 2020.

Nonresidential building starts rose 8% in May to a seasonally adjusted annual rate of $188.8 billion following the very steep April decline related to COVID-19. Commercial starts gained 6% in May and manufacturing starts rose 167%, but institutional building starts were flat.

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