For the seventeenth consecutive month, the AIA’s Architecture Billings Index (ABI) has reported a decline in billings. June’s score was 46.4, the number indicates respondent firms saw a drop in billings from the previous month, but not at the same rate as May. Any score below 50 indicates a decline in billings.
AIA chief economist Kermit Baker has again suggested that elevated interest rates and increased construction and material costs may be contributing to the weakened economic conditions this past year and a half.
“Architecture firms continue to face a period of headwinds in the construction sector, driven by elevated interest rates, high construction costs, and generally weak property values,” said Baker in a statement. “This is the seventeenth consecutive month of a billings decrease and yet, despite the softness firms remain generally optimistic that conditions will start to improve once interest rates begin to ease.”
In its June report the AIA intimated the “healthy” number of projects that firms have had in the works is dwindling, dropping to just 6.4 months on average. According to AIA this is “the lowest that backlogs have been in more than three years.” The need for new project inquiries and design contracts is evident, however. Only half of the respondent firms reported an uptick in new project inquiries, a score of 51.6. And again firms indicated a decline in value of newly signed design contracts.
Regionally, the Northeast again remains the strongest with a score of 52.2, the only region in the country to report increases in billings. The lowest in terms of billings remains the Midwest with a score of 40.9, a drop from May’s 41.7.
In the breakdown by sector, firms with a mixed practice, not concentrated on design projects for a single category or typology, reported the highest score, 46.9. All building sectors remained under 50 for June.
As Baker indicated in his statement it may likely take lowered interest rates for the needle to be pushed. In June, the Federal Reserve said this may not happen until December.
