I just posted about increased architectural building serving as a positive economic indicator for growth in the construction industry so I'll balance that news with a dose of bad news. The price of lumber is absolutely wildin. See for yourself in the figure below created by Bill McBride at the Calculated Risk blog:
Prices have been essentially climbing since the middle of 2015 and then accelerated in the fall and winter of 2017 with the devastating wildfires in northern and southern California with the market knowing that thousands of homes would need to be rebuilt. The steepest growth comes in January 2018 as lumber tariffs on Canadian lumber were imposed (if you are looking to troll, this is not a political statement; it comes from the National Association of Homebuilders).
Anecdotally, I am hearing project owners bemoaning the increased cost in lumber and steel (also subject to tariffs) to the point many are contemplating shelving projects that haven't broke ground and busted financial models for those that have. It will be interesting to see how these developments affect forward-looking economic indicators like the AIA ABI going forward.
It has been a couple of months since my last post, but there is good news to spread: The Architectural Billing Index reported by the American Institute of Architects increased last month from 52 to 52.8 which marks its eighth straight month of increases. Project Inquiries came in at 59.3, up from 56.7 in April, and the Design Contracts Index increased from 50.1 to 53.3 in May. As a reminder, any value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. The ABI is a leading indicator of commercial building construction by approximately nine to 12 months.
Here's is the regional breakdown for May 2018:
Sector Averages for May 2018:
All in all, very positive news. Not to be Debbie Downer, there are headwinds that can very easily slow the AEC industry (lack of labor, high material prices, etc.), but we can enjoy this data as a great way to start the summer.