February’s ABI national overall score of 52.0 was down 2.7 points from January’s 54.7 but still well into the expansionary zone, (>50). U.S. architecture firms with emphasis on multifamily and/or institutional specialization reported exceptional strong billings. Regionally activity was especially strong in the West and Midwest. The new projects inquiry index came in at 62.4, up 1.3 points from last month, while the new design contracts index increased 0.4 of a point to 54.5. Regional monthly scores were: South 54.4, West 57.6, Midwest 54.5 and Northeast 47.5.
The Architecture Billings Index (ABI), is a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction spending activity. The results are seasonally adjusted to allow for comparison to prior months. Scores above 50 indicate an aggregate increase in billings, and scores below 50 indicating a decline.
Figure 1 presents a map of the U.S. depicting the four ABI regions. It is color coded to show expanding billings and increased growth in green and declining billings and negative growth in red. The data is shown on this map is as three month moving averages (3MMA), and 3 month year on year (y/y), percent change.
On a 3MMA basis, the national ABI score was 53.2 with a 1.8% annual growth rate. The Western region posted the highest 3MMA of 56.5 and an exceptionally strong annual growth rate of 15.1%. The Southern region’s 3MMA ABI was 54.8, with an annual growth rate of 3.9%. The Midwest zone scored a 54.4, 3MMA, its annual growth rate was 2.3% y/y.
The Northeast was the only region in the red, recording an ABI of 48.1, 3MMA. Its annual growth rate was negative 7.6%.
Figure 2 charts the ABI sub-index for Commercial / Industrial and Institutional from 2016 to present. The Commercial/Industrial sub-index fell 2.3 point month on month to 51.0 in February, still in the expansionary range but has now been trending downward for three consecutive months. The good news is that the index has now been greater than 50 for 25 consecutive months. The Institutional sector is trending sharply upward, scoring a 53.8 in February, up 1.3 points m/m. February’s score marks the 16th consecutive month that the institutional index has been greater than 50. Referencing the U.S. Census Bureau construction put in place data, the non-residential construction market has now posted 73 consecutive months of gains on a twelve month-moving-total, (12MMT) basis.
Table 1 lists the overall ABI and all of its sub-indexes. It presents and compares monthly and 3MMA data, showing percentage point change on both three and 12 month basis, as well as momentum. Green denotes positive change, while red indicates negative growth. National momentum, (3 month y/y subtract 12 month y/y) was slightly negative, at -0.9%.
Inquiries momentum was positive 0.5%. Design contract momentum fell 1.0%. Regionally, momentum was mixed with two of the four zones posted positive momentum; The Northeast recorded negative 9.8% momentum, while the Midwest recorded a negative 0.9% momentum. The Midwest’s numbers have been trending higher, while the Northeast’s numbers have been deteriorating, (ABI less than 50 for three months in a row). The South’s momentum was positive 2.5% as the West posted momentum was a stout +9.9%. Momentum for the remaining project categories was mixed: Multi-family residential, (+8.9%), Commercial / Industrial, (-1.1%), Institutional, (-2.1%) and Mixed-use, (-2.6%).
In its release today, AIA Chief Economist, Kermit Baker, Hon. AIA, PhD, quoted the following:
“We remain optimistic about the trends we’re seeing at architecture firms this year with the ABI continuing to show growth in February.”
February’s ABI report was very encouraging, pointing to continued growth in construction projects for the remainder of 2018 as well as through the first quarter of 2019.
At Gerdau we follow the ABI because it is a leading indicator of non-residential construction activity with an approximate 12 month lead-time to ground-breaking. The ABI has a proven track record and as such it is useful for business planning purposes.