In a previous post I showed how architectural billings, a leading indicator of construction activity, has been very up-and-down since early 2021 after rocketing upwards from a pandemic-induced crater. In theory, contractor activity should similarly move similarly lagging by nine to 12 months. But that has not happened. Backlogs have steadily moved upwards since the tail end of 2021. Given that increasing backlogs are a proxy for how busy contractors are (and by extension, if backlogs increase, so should contractor pricing power, leading to higher fees), this is positive news that outperforms the AIA ABI expectations. 

The above curve plots the average backlog by quarter, so the curve is smoothed. If we drill down into the month-over-month data, it reveals more, albeit mild, volatility. Overall backlogs are unchanged from May, but drilling into the industry breakdown shows some randomness, with Heavy Industrial down big but Infrastructure up even bigger (Federal infrastructure bills perhaps? Infrastructure is up over 40% year-over-year). The story is similar for regional and company size breakdowns.

The reductive hot take is that it is a good time to be a $50-100 million per year contractor performing  infrastructure work in the northeast and midwest markets. 
​More detailed information is below: 

The Architecture Billings Index (ABI) as reported by the American Institute of Architects (AIA), is clinging to the increasing billings side of the ledger with a 50.1 handle for June. The ABI is a nine-to-twelve-month leading indicator of building construction activity, with ABI measures above 50 indicating that billings are increasing and those below 50 signaling a decreasing billings. While June's reading was down from May's 51, this is the first two-month positive streak since August/September of last year.

​The data was largely mixed, with half of the sub measures above 50 and four of ten increasing month-over-month. Seven of ten measures are down year-over-year, with the West falling by almost 16%.

While the architecture/engineering/construction market clearly ripped up from the COVID chasm, the ABI performance has whipsawed since 2021. While the industry seems really busy, the capacity to deliver projects has been hampered by supply chain issues, lack of labor and, more recently, increasing interest rates. As long as those headwinds persist yet demand remains high, we will likely continue to experiencing seesawing ABI figures. 
​Detailed data can be seen below: