By American Institute of Architects
The AIA/Deltek Architecture Billings Index score was 45.7 for the month, as the majority of (architectural) firms continued to report declining billings.
Despite recently announced rate cuts by the Federal Reserve, clients are still cautious about future projects. Inquiries into potential new projects continued to increase, but the pace has slowed since the beginning of the year. And the value of newly signed design contracts at firms decreased for the sixth consecutive month in September, although the pace of that decline has moderated somewhat over the last few months. However, firms continue to report average backlogs of 6.4 months, which remains above pre-pandemic historical averages and is a good indicator of existing work in the pipeline, even if new work coming in has slowed.
Conditions remained soft across the country as well in September. Billings were softest at firms located in the West for the third consecutive month, followed by firms located in the Midwest. Business conditions may be close to turning positive at firms located in the South, though, where they only declined slightly this month.
By firm specialization, firms with a multifamily residential specialization saw billings soften further in September, while billings also remained fairly weak at firms with a commercial/industrial specialization. Although billings continued to decline at firms with an institutional specialization as well, the pace of that decline remained more modest than at firms of other specializations, which has been the case since the beginning of the summer.
Interest rates and inflation are down
Conditions generally continue to improve in the broader economy. Nonfarm payroll employment grew by 254,000 new positions in September, surpassing expectations. Growth was particularly strong in construction, where 25,000 new positions were added, including 17,000 nonresidential specialty trade contractors. However, architectural services employment continued to soften, declining by 1,300 positions from July to August (the most current data available). Employment in the sector is now down by 4,700 positions from its post-pandemic peak of 208,300 in July 2023.
The overall economic outlook continues to improve, though, with inflation continuing to decline and the Federal Reserve starting to lower interest rates. The Consumer Price Index increased by just 0.2% from August to September and was up 2.4% from the previous year, nearly reaching the Federal Reserve’s target of 2%. The Federal Reserve lowered interest rates by 50 basis points at their September meeting and are predicting two additional reductions of 25 basis points each before the end of the year, which should begin to ramp up business that was on hold awaiting that decline. (Source)
