April Billings Index Moderates Slightly

THURSDAY, MAY 26, 2022


Last Wednesday (May 18), The American Institute of Architects released its Architectural Billings Index score for April, revealing a slight decrease in demand for design services.

The ABI is a diffusion index derived from the AIA’s monthly Work-on-the-Boards survey, conducted by the AIA Economics and Market Research Group. The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months.

An index score of 50 represents no change in firm billings from the previous month, a score above 50 indicates an increase in firm billings from the previous month and a score below 50 indicates a decline in firm billings from the previous month.

Latest Report

For the fifteenth consecutive month architecture firms reported increasing demand for design services. While the ABI score dropped 1.5 points in April to 56.5 from its score of 58.0 reported in March, the AIA reports that there has been continued growth results in all regions and major sectors.

New inquiries also reported a small decrease from 63.9 to 62.3. Design contracts revealed a slightly larger drop in numbers reporting 55.4 from 60.5 in March. Despite the reduced reading, the AIA noted that new project inquiries and design contracts remained strong.

“While business conditions at architecture firms have been very encouraging over the past year, project activity has been steadily shifting toward work on existing buildings,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Billings for reconstruction projects exceeded those for new construction for the first time in the last two decades. While the reconstruction share of building activity will continue to ebb and flow, in general, we’ll continue to move toward an increased share of building activity for reconstruction and a decreased share for new construction.” 

Additional highlights from the April report included:

  • Regional averages: West (58.2); Midwest (57.6); South (57.3); Northeast (53.1); and
  • Sector index breakdown: mixed practice (61.2); commercial/industrial (60.7); multi-family residential (57.2); institutional (51.8).

The report notes that the regional and sector categories were calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

Data representing the month of April can be viewed here.

Previous Results

Last month, the AIA released its Architectural Billings Index score for March, revealing a rapid increase in demand for design services.

The ABI score rose 6.7 points in March, rising to 58 from its score of 51.3 reported in February. The latest score for March marks the fourteenth consecutive month of positive readings for the index and is one of the highest scores seen since the economic recovery began just over a year ago.

New inquiries were also reported to have increased modestly from 62.5 to 63.9. Numbers for design contracts also rapidly expanded, revealing an increase of 5.3 points to 60.5.

Another issue mentioned by the Institute was increasing inflation. In March the Consumer Price Index (CPI) rose by 1.2% for the month and 8.5% from one year ago. The monthly increase was reported to be the largest in nearly two decades and was primarily driven by higher energy prices (largely due to the war in Ukraine) and continued increases in the prices of groceries/food at home.

Additional highlights from the March report included:

  • Regional averages: South (57.2); Midwest (56.2); West (54); Northeast (46.3); and
  • Sector index breakdown: mixed practice (58.2); multi-family residential (57.2); commercial/industrial (55.3); institutional (50.5).

The report notes that the regional and sector categories were calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

According to the AIA, more than half (52%) of firm billings over the past year are from renovations, retrofits, rehabilitations, alterations, additions and historic preservation work. Firms participating in the report also indicated that the end of the first quarter of 2022, backlogs stood at an average of 7.2 months, an increase of more a month from one year ago and a new all-time high since the Institute began collecting data on backlogs in 2010.

Data representing the month of March can be viewed here.

In March, the AIA revealed the ABI for February, revealing a slight improvement in business conditions for architecture firms. The ABI score rose 0.3 points in February, marking the thirteenth consecutive month of positive readings for the index. New inquiries were also reported to have increased modestly from 61.9 to 62.5, while design contracts decreased from 56.1 to 55.2, respectively.

Despite the small increase, the Institute reported that staff recruitments, materials shortages and inflation were ongoing concerns in the industry, among others.

Additional highlights from the February report included:

  • Regional averages: South (58.6); Midwest (53.2); West (47.9); Northeast (44.3); and
  • Sector index breakdown: mixed practice (53.8); multi-family residential (52.6); commercial/industrial (55.4); institutional (47.2).

The report notes that the regional and sector categories were calculated as a three-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

Data representing the month of February can be viewed here.

In February, the AIA revealed the ABI for January, revealing a slight improvement in business conditions for architecture firms.

While the ABI score decreased one point to 51, it marked the twelfth consecutive month of positive readings for the index. Inquiries into new work and the value of new design contracts both remained strong as well, reporting scores of 61.9 and 56.1 respectively.

Additional highlights from the January report included:

  • Regional averages: South (61.2); Midwest (51.5); West (47.6); Northeast (46.8); and
  • Sector index breakdown: mixed practice (59.3); multi-family residential (50.1); commercial/industrial (54.2); institutional (47.3).

In January, the AIA confirmed that the ABI ended 2021 on a strong note, having reported a score of 52 for the month of December.

The ABI score for rose one point compared to 51 reported in November. Inquiries into new work and the value of new design contracts also remained strong, however, and backlogs—at an average of 6.5 months—remained near their highest levels since the AIA began tracking this metric in 2010.

Additional highlights about the December report included:

  • Regional averages: South (56.4); Midwest (51.0); West (47.5); Northeast (45.3);
  • Sector index breakdown: mixed practice (60.6); multi-family residential (49.2); commercial/industrial (49.2); institutional (47.6);
  • Project inquiries index: 66.8; and
  • Design contracts index: 55.8.

While the ABI climbed throughout the spring and summer of 2021, it wasn’t until February that the report would indicate its first positive mark since before the COVID-19 pandemic. Reportedly a boost from January’s score of 44.9, the report revealed a score of 53.3.

One of the ABI’s lowest points was at the end of March 2020, when it plummeted from the pandemic. That index revealed a 20.1 drop in points to a score of 33.3. The score nearly doubled the decrease of 9.4 points experienced at the beginning of the 2001 recession and the loss of 8.3 points recorded during the Great Recession, making it the index’s largest single month decline in its nearly 25-year history.

Input Prices, Increased Inflation

According to an analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data by the Associated Builders and Contractors, construction input prices rose 0.8% in April. In nonresidential construction, input prices also witnessed an increase of 0.9%.

The latest increase makes April the nineteenth-straight month in which the cost index rose more than the bid-price index on a year-over-year basis.

The producer price index for inputs to new nonresidential construction—the prices charged by goods producers and service providers such as distributors and transportation firms—rose 0.8% from March to April and 20.9% ­over the past 12 months. An index for new nonresidential building construction—a measure of what contractors say they would charge to erect five types of nonresidential buildings—rose 4.1% for the month and 19.9% from a year earlier.

According to the latest report, construction input prices are up 23.7% higher from a year ago—a slight decrease from March, which reported 24.4% higher from a year ago and 39.1% higher from February 2020. Nonresidential input prices are dropped 1% from March, reporting 24.0% higher prices year-over-year.

In looking to the 11 subcategories of construction materials, the association reported that input prices were up in 10 of them for the month. Softwood lumber was the only category in which prices decreased, falling 17.7% for the month and down 5.5% from last year. The largest price increases were in natural gas (16.9%) and unprocessed energy materials (10.3%).

Other products rising more than 1% in March include: fabricated structural metal products (2.0%); iron and steel (1.2%); steel mill products (2.4%); nonferrous wire and cable (1.3%); concrete products (1.8%); and crude petroleum (4.5%).

As a result of the continued uptick in prices and inflation, the Associated General Contractors of America have again urged the Biden Administration to provide relief to hard-hit employers by ending tariffs on key construction materials and reconsidering its recently proposed Buy America regulations that will make it harder for firms to find and pay for key construction materials.

In looking at the price index specifically, AGC notes the following increases year-over-year:

  • Diesel fuel, up 86.5%;
  • Aluminum mill shapes, up 44.8%;
  • Architectural coatings and paint, up 32.1%;
  • Plastic construction, up 29.9%;
  • Roofing asphalt and tar products, up 20.8%; and
  • Truck transportation of freight, up 27.4%.

AGC officials went on to note in its report that the best way to keep costs from rising was to allow contractors to buy materials from the widest possible range of suppliers. In addition, officials suggested the elimination of measures that artificially inflate the cost of products.

   

Tagged categories: American Institute of Architects (AIA); Architects; Architecture; Billings; Color + Design; Color + Design; Commercial / Architectural; COVID-19; Design; Economy; Good Technical Practice; Market; Market data; NA; North America; Program/Project Management; Project Management; Projects - Commercial; Upcoming projects

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