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:
As far as market sectors are concerned, May was a month of increases across the board:
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:
Moving on to geographic area, the results are more mixed:
Lastly, the backlog data by contractor size:
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).