Despite some signs of slowing, billings at U.S. architecture firms were positive for the 18th consecutive month in March, according to new seasonally adjusted figures from the American Institute of Architects.
The Architecture Billings Index, a leading economic indicator of nonresidential construction activity, had a March rating of 50.5 (any score above 50 indicates an increase), down from 55.5 in February.
“While the index has leveled off a bit compared to previous scores, there are enough nonresidential projects slated to begin construction over the next several months that this month’s numbers should not be cause for concern,” said AIA Chief Economist Kermit Baker. “In terms of the nonresidential construction market, the retail, education and health-care sectors have all increased at a double-digit rate in February compared to year-ago levels.”
This news comes on the heels of the Census Bureau reporting that housing starts in March were lower than forecasted and finished with the second-slowest rate over the last 12 months, behind December. Building permits, which are indicative of builder confidence, fell more than expected as well.
By region, the Northeast led the nation with a three-month moving average ABI rating of 55.3, followed by the Midwest (55.2), the South (54.1), and the West (49.3).
Michael Judd, president of Greenwich Consultants LLC, said, “Right now the overall market is seeing the effects of higher interest rates and rising inflation, and there is some thought that growth may be slowing throughout the rest of the year. These factors may keep profits at a moderate level in the commercial/nonresidential markets, while the residential markets are experiencing decreasing profits and suffering from decreased demand for housing.”
The Architecture Billings Index is derived from a monthly “Work-on-the-Boards” survey and produced by the AIA Economics & Market Research Group. Based on a comparison of data compiled since the survey’s inception in 1995 with figures from the Department of Commerce on construction put in place, the findings amount to a leading economic indicator that provides an approximately six-month glimpse into the future of nonresidential construction activity.