Checking in on the AIA ABI

Wow...it has been a while since I've posted. Over a year ago, I posted about eight months in a row of growing architectural billings. Since then...meh. Let's look at the July 2019 numbers (posted on August 21, 2019). The Architectural Billing Index reported by the American Institute of Architects clocked in at 50.1, up from 49.1 in June. Project Inquiries came in at 54.9, up from 50.3 in June, however the Design Contracts Index decreased from June's 50.3 to 49 in July. 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. So we have been essentially flat lining for a few months (50.3 in February, 47.8 in May, 50.5 in April, 50.2 in May and 49.1 and 50.1 in June and July respectively). This span has provided the first values less than 50 since September 2017. Time to panic? Short answer: no. The design and construction industry has been very hot, like the rest of the general economy, for a while. The economy is slowing, but it's not slow.

Here's is the regional breakdown for July 2019:

• West: 51.2 (up from June's 49.3)
• Northeast: 48.3 (up from June's 46.1 figure but this is five months in a row of sub 50 performance)
• South: 48.3 (this is the first time in 84 months the South has been below 50, which was in June 2012)
• Midwest: 48.9 (flat from last month)

Like I said, meh. Three out of four declining, but nothing to panic over. Hey, let's hear it for the West!

Sector Averages for July 2019:

• Multi-family Residential: 50.6 (up from 46.3, ending four months of sub 50 performance)
• Commercial/Industrial: 49.2 (versus 52.3 in June, a noticeable drop)
• Mixed Practice: 48.9 (down from 54.3, a more noticeable drop)
• Institutional: 49.8 (up from June's 47, the fifth month in a row below 50)

So yes, things are slowing from an ABI perspective. Given these trends over the past 5-ish months and ABI's status as a 9-12 month leading indicator, I would construction starts to begin slowing in the next half-year or so. More on that soon...