Architectural billings decline as election uncertainty creates 'higher levels of volatility' in the industry

Dive Brief:

  • The Architectural Billings Index fell to 51.5 in July, down from June's score of 52.6, the American Institute of Architects reported Wednesday. 
  • Within the index, multifamily residential once again had the highest score at 55.2, followed by institutional at 50.7, mixed-practice at 50.5, and commercial/industrial at 50.3.
  • Although July's score declined from June, it still represents an increase in design services, as any mark above 50 indicates a rise in billings. July's design contracts index rose to 51.8, but the new projects inquiry index fell to 57.5.

Dive Insight:

The ABI is an indicator of future construction spending — with a lead time of about nine to 12 months — as design services lead to new commercial projects.

AIA Chief Economist Kermit Baker attributed the slight decline in design services to "uncertainty" around the upcoming presidential election "causing some funding decisions regarding larger construction projects to be delayed or put on hold for the time being." He said he expects that uncertainty to continue until the November election and forecast the design and construction industry will see "higher levels of volatility" until then. 

Recent construction industry reports have been largely disappointing, as the Commerce Department reported earlier this month that construction spending fell 0.6% in June — marking the 3rd consecutive month of declines. And last month, Dodge Data & Analytics reported that the value of June construction starts tumbled 7% to a seasonally adjusted annual rate of $595.1 billion. However, on the positive side, the Dodge Momentum Index rose 0.5% in July to 134.7. 

This month's ABI report isn't the first time that experts have warned of the negative effects of the volatile election season on industry growth. Last month, the AIA noted in its Consensus Construction Forecast that uncertainty surrounding the election could stifle stronger expansion in the nonresidential construction sector.

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Filed Under: Commercial Building Design Economy
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