Demand for design services increased for the seventh month in a row in August, with the American Institute of Architects' latest Architecture Billings Index coming in at 53.7 for the month, compared to 51.9 in July and 54.2 in June. The ABI is an indicator of future construction spending with a nine- to 12-month lead time.
Within the index, the commercial/industrial sector climbed to 57.6 in August, up from 55.4 in July. The institutional sector continued to edge down, dipping from 52 in July to 50.1 in August, while the multifamily segment decreased from 55.8 to 53.8 for the period. Mixed-practice climbed back into positive territory, rising from 48.4 in July to 52.5 in August.
The sub-index tracking new project inquiries continued its upward path in August, jumping from 59.5 in July to 62.5. New design contracts decreased from 56.4 in July to 54.2 in August.
Steady demand for design services is a positive sign for construction companies, as they can use the trend as a gauge for future work. Despite a slight dip in construction spending from June to July, the category is still up 4.7% year-over-year for the first seven months of 2017.
Strong employment figures, too, bode well for future construction activity. Construction payrolls added 28,000 net new jobs in August, making it the best month for industry employment since February. Job growth is expected to continue as demand for design services expands and construction backlog remains strong.
Still, a three-month slowdown in commercial construction activity as tracked by the Dodge Momentum Index could point to a leveling off in the segment, though the institutional sector proved strong in its latest report. Construction is expected to finish the year strong, with 2017 starts pacing at an annual rate of $728.1 billion as of July, according to Dodge Data & Analytics. Going into the year, Dodge forecast starts values would increase 5% year-over-year to $712.9 billion in 2017.
The industry is awaiting more details about the Trump administration's $1 trillion infrastructure spending plan. Although a formal proposal is expected from the administration this fall, many expect that debate on those terms will have to wait until next year. In the meantime, a recent executive order from the president to streamline approvals for some infrastructure projects could buoy construction companies' optimism.
More immediately, the need for rebuilding in areas of Texas and Florida affected by Hurricanes Harvey and Irma could further increase demand for design services. Moody's found that the combined value of property destroyed by the storms could be as much as $200 billion.