July Architectural Billing Index Growth Softens, But Design Services Increase

The monthly Architecture Billings Index (ABI) came in at a score of 51.9 in July, down 2.3 points from June's 54.2, the AIA announced today.

The ABI is a leading economic indicator of construction activity in the U.S., and reflects a nine- to 12-month lead time between architecture billings and construction spending nationally, and regionally, as well as by project type. A score above 50, as seen every month since February, represents an increase in billings from the previous month, while a score below 50 represents a contraction.

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July's positive reading marks the sixth consecutive month of growth in design services since January's marginal decline, and the AIA isn't concerned about the 2.3 month-over-month decrease in billings. The new project inquiries index—the most reliable indicator of future billings—dipped slightly in June, which can be attributed to the 2.3 point decline in billings (although billings are still in positive territory with a score of 51.9). The new project inquiries index was recorded at 59.5 in July, a 0.9 point increase from June's 58.6, and an indication that billings will likely increase in August.

“The July figures show the continuation of healthy trends in the construction sector of our economy,” said AIA chief economist Kermit Baker, Hon. AIA, in a press release. "In addition to the balanced increases in design billings across all major regions and construction sectors, the strong gains in new project work coming into architecture firms points to future growth in design and construction activity over coming quarters.”

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The design contracts portion of the index increased 2.7 points from June's score of 53.7, to a score of 56.4 in July. Both inquiries and design contracts have stayed above the 50-point threshold every month in 2017, a sign that momentum is strong in the market despite fluctuations in pace month-to-month.

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Regional billings, which, unlike the national score, are calculated as a three-month moving average, increased in two of four regions in July. The Northeast posted the most dramatic gains in July, posting a score of 53.6, a 2.1 point increase from June's score of 51.5. Continued growth in the Northeast is promising, as it was the only region to see billings fall below the 50-point threshold during April and May, and has lagged behind the South and Midwest region consistently during 2017. Design services were on the rise in the Midwest region as well, with a score of 53.8—a 1.4 increase from its score of 52.4 a month prior. The South and West regions posted modest declines in billings month to month (0.5 and 1.4 point dips, respectively), but posted scores above 50, indicating design services increased, albeit at a slower pace than seen last month.

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After six consecutive months of all four sectors posting billings in positive territory, a 3.3 point dip in the mixed practice sector broke the trend, with a contraction in design services to a score of 48.4. The residential sector posted a marginal 0.5 point decline from June's score of 56.3, but still posted the strongest score of all sectors at 55.8. The commercial/industrial sector was a close second with a score of 55.4, a 1.4 point gain from June's score of 54.0, and the institutional sector posted a 0.6 point gain month-over-month to a score of 52.0. (Results of sectors are also calculated as a three-month moving average.)