November's ABI Score Reflects Small Increase in Design Services
The Architecture Billings Index (ABI) reported a second straight month of increase in design services following two consecutive months of shrinking demand. The November ABI score of 50.6 was down just a tick from October’s 50.8, according to the American Institute of Architects (AIA). This still reflects an increase in demand for design services since all scores above 50 indicate an increase in billings and scores below 50 indicate a decrease.
The ABI serves as a bellwether for future nonresidential construction spending and activity. The average lead time between architecture billings and construction spending typically runs somewhere between nine months to a year.
"For the construction sector, positive news from the Architecture Billings Index is a nice way to end 2016 and ring in 2017," said ConstructConnect's Chief Economist, Alex Carrick. "According to the latest data release from the Bureau of Labor Statistics, the total number of jobs in architectural and engineering services has finally returned to being even with its previous peak in February 2008, at 1.45 million. This sets the stage for more good news to come."
The new projects inquiry index for November saw a healthy increase, climbing from 55.4 in October to 59.5 in November. The design contracts index also got back into positive territory, climbing from 48.7 in October to 50.2 in November.
"The ‘Trump rally’ in stock markets, which is taking index levels to new all-time highs, is based on expected tax-cutting and infrastructure spending initiatives which will be beneficial for profits and will also help to spur on capital spending," noted Carrick. "Such new project initiatives will be welcomed by design firms since they can anticipate requests for early input."
There was some positive news coming from the latest three-month regional averages. Last month, only the South recorded a score above 50. This month it was joined by the Midwest and Northeast. The South had the highest average with a score of 51.3, down from 53.7, still indicating an increase since it was above 50. The Midwest rose from 46.8 to 50.9 to and the South increased from 47.3 to 50.8. This is the first time the Northeast has been above 50 since June. The West saw little movement, sliding down from 49.7 to 49.6 in November.
Multi-Family Residential led all sectors again with a score of 51.7 over October’s 51.2. After hovering just below 50 in October, both Mixed Practice and Commercial/Industrial saw an increase in design services. Mixed Practice rose from 49.5 to 51.3 and Commercial/Industrial moved up from 49.8 to 50.4. Institutional remained in negative territory but did inch closer to 50 by increasing from 49.1 in October to 49.5 in November.
So far in 2016, the ABI has been pretty solid with only three months of shrinking demand. This is a good sign as we start looking forward to 2017.