The Architecture Billings Index (ABI) dropped below 50 for the fourth time this year with a score of 49.3 for November. This decrease in design services comes as a bit of a shock after having strong scores the previous two months, 53.7 in September and 53.1 in October. This is reminiscent of what we saw back in August when the ABI score dropped to 49.1, the lowest score for the year. The decrease in August came on the heels of the two highest scores for the year in June (55.7) and July (54.7). The ABI acts as a barometer for future nonresidential construction spending and is a leading indicator of future construction activity with the average lead time between billings and construction spending is around nine months to a year.
On a positive note, both the design contracts index and the new projects inquiry index both increased from their scores in October. The design contracts index moved up from 53.2 to 53.5 and the new projects inquiry index inched up from 58.5 to 58.6 in November.
Taking a look at the regional averages, the West and the South continue to remain strong. The West edged up from 54.4 to 54.5 and the South was at 55.4 in November. The Midwest dropped below 50, going from 52.6 to 47.8 and the Northeast, which had been gradually climbing to score close to 50, dropped from 49.2 down to 46.2.
All sectors remained above 50 again in November. Multi-family Residential was the only sector that’s score changed, going from 52.5 to 53.8. All other sectors Commercial/Industrial (55.1), Mixed Practice (54.9) and Institutional (51.5) all had the exact same three-month average score from October.
AIA’s Chief Economist Kermit Baker, posits that the decrease in design service demand could probably be attributed “tightness in construction financing” and the labor shortage affecting the construction industry in many areas of the country. The good news being that we have seen some positive turnarounds in construction employment over the last couple of months with 46,000 jobs added in November and 34,000 added in October. This was after a stretch of stagnant growth during a few months during the middle of the year. The latest report from the Bureau of Labor Statistics (BLS) shows that the number of unfilled positions in construction has been declining, down to 126,000 in October.