Photo credit: Residential firms continue to report healthy conditions. Commercial/industrial firms have seen more volatility recently after a generally positive 2013. Institutional firms have since reported seven straight monthly declines.
Modestly positive ABI scores for January and February suggested current weakness might have been weather related, but the weak March reading -- 48.8; third decline in five months --? indicates a broader soft spot in design activity.
Business conditions remain weak for firms in the Northeast and Midwest, where ABI scores have been negative for five months. Billings remain strong in the South and moderate in the West, where ABI scores have been positive for the past two quarters.
Following a modest two-month recovery in the level of demand for design services, the Architecture Billings Index (ABI) again turned negative in March.
As a leading indicator of construction activity, the ABI reflects the approximate nine- to twelve-month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 48.8, down sharply from a mark of 50.7 in February. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new-projects inquiry index was 57.9, up from the reading of 56.8 the previous month.
With this release, the AIA has added a new indicator measuring the trends in new design contracts at architecture firms that can provide a strong signal of the direction of future architecture billings. The score for design contracts in March was 48.2.
“This protracted softening in demand for design services is a bit of a surprise given the overall strength of the market the last year and a half,” said AIA Chief Economist Kermit Baker. “Hopefully, some of this can be attributed to severe weather conditions over this past winter. We will have a better sense if there is a reason for more serious concern over the next couple of months.”
Key March ABI highlights:
Regional averages: South -- 52.8; West -- 50.7; Northeast -- 46.8; Midwest -- 46.6
Sector index breakdown: multi-family residential -- 52.1; commercial / industrial -- 49.6; institutional -- 49.0; mixed practice -- 47.6
Project inquiries index: 57.9
Design contracts index: 48.2
Regional and sector ABI categories are calculated as three-month moving averages, whereas the national index, design contracts and inquiries are monthly numbers.