The American Institute of Architects (AIA) made us wait a few days longer than normal, but it was worth it. The May installment of the Architecture Billing Index (ABI) dropped this morning and they have reached another record high of 58.5, exceeding the previous record of 57.9 set last month. A value greater than 50 means that architecture billings are increasing; conversely, any value less than 50 means billings are decreasing. The ABI is a nine-to-12 month leading indicator of construction activity. Spoiler alert: the construction industry is poised to get even busier of the next year.

Regionally, the South has been the hottest market for some time, but this month's data reveals an interesting plot twist:

• Northeast: 54.2 (down  from 55 in April and the only regional decliner)
• South: 59 (up from 58.3 last month and and setting a new high)
• Midwest: 63.4 (up steeply from last month's boffo 60.6 and a new record)
• West: 57.4 (up from April's 52.4)

The Midwest's 63.4 is the highest individual ABI number since at least 2012. If anyone can explain how the Midwest went from perpetual laggard to the hottest market for architects almost overnight, please let me know. Perhaps a road trip to Chicago is in order...

As far as market sectors are concerned, May was a month of increases across the board:

• Multi-family Residential: 59.5 (up from 56.9 in April)
• Commercial/Industrial: 60.6 (up from 59.1 last month and a new record)
• Mixed Practice: 57.9 (up from 55 in April)
• Institutional: 57.1 (up from April's 56.7)

Not only were all of sectors up, but they were up pretty strongly.

If there is one source of concern (and I am digging deep here), it would be project inquiries, which slipped from a record of 70.8 in April to 69.2 in May. This is still a great result but my proclivity for pessimism needs to show itself somewhere. Great, now I'll shove it back into the recesses of my soul so we can enjoy the overwise great news.

Let's keep this party going!

The slides from my presentation to the Upstate South Carolina chapter of the American Society of Civil Engineers-Institute of Transportation Engineers (ASCE-ITE) on June 23, 2021. Questions and comments are certainly welcome. Thanks to Grant Hollis for the invitation to speak.
(For my California friends: upstate South Carolina includes the cities of Anderson, Greenville and Spartanburg and is the home of the Clemson Tigers. Now you know.)

It has been a while since I've posted about contractor backlogs. I'm the guest speaker for an ASCE-ITE chapter in the southeast next week and we will be discussing (shocker) construction economics. Construction input costs are up (another shocker: it's predominantly due to material costs), but costs are also a function of contractor backlogs. When backlogs get deep, contractors raise fees, leading to higher project costs and when they slide, contractors decrease their fees in order to be more competitive. Simple supply and demand. So, how are backlogs? Luckily, our friends at the Associated Builders and Contractors (ABC) publish this data. Generally speaking, they have been increasing in the aggregate since November 2020 with a few dips along the way. The November 2020 backlog data point of 7.2 months was the lowest result since Q4 2010 (the data used to be released quarterly and now it is monthly. Please note that I have aggregated the monthly data into quarterly data in the graphs below. The aggregate backlog data is shown below:

So the general trend is positive, yet let look at the details, starting with the industry sector breakdown for May:

• Commercial & Institutional: 8 months (no change from April)
• Heavy Industry: 6.5 months (down from 7.3 last month)
• Infrastructure: 8.7 months (up from 7.9 in April)

What I find interesting is that everyone in the United States is talking about infrastructure, the backlogs for contractors performing that type of work has been on a downward trend since Q4 2017. This could be due to many factors, yet my mind is formulating a conspiracy theory that posits that it is declining because "infrastructure week" went from being a joke in the last presidential administration and is shaping up to be a Greek tragedy in the current one.​ The overall quarterly numbers are represented below at the close of the second month of Q2 2021:

Moving on to geographic area, the results are more mixed:

• Middle States: 7.5 months (up from 6.9 months in April)
• Northeast: 7.3 months (downy from 7.9 months in April)
• South: 9.5 months (up sharply from 8.2 months last month)
• West: 7.7 months (down sharply from 8.8 months last week)

​The quarterly trends through the second month of Q2 are shown in the figure below:

Lastly, the backlog data by contractor size:

• <$30 million: 7.6 months (up fractionally from 7.4 months in April)
• $30-$50 million: 6.8 months (a substantial decrease from 8.5 last month)
• $50-$100 million: 9.5 months (down from last month's 10.3)
• >$100 million: 13.4 months (big increase from 10.9 months in April and the biggest backlog reported)

So, mixed bag with the general trend moving upwards. This is far from a bold prediction, yet my gut tells me that increasing backlogs will be another tailwind (if you are a contractor and like higher fees) or a head wind (if you, like me, are on the owner's side of the contract).