The Architecture Billings Index, an indicator measuring the future of nonresidential construction spending activity, remained in positive territory for the third consecutive month with a score of 53.3. All three sectors measured by the index (commercial/industrial, institutional and residential) remained in positive territory, and of the four national regions, only the West recorded a score below 50, which indicates a contraction in billings.
Credit: AIA

Architecture firm billings made serious gains in June, pushing the American Institute of Architects' Architecture Billings Index (ABI) to a 53.3 level for the month, a high for 2014 that improved on the 52.6 reading in May. Index scores above 50 indicate billings growth.

New design contracts at architecture firms have risen sharply in each of the past three months, indicating a widespread upturn in activity after weak quarters at the end of 2013 and the beginning of this year. The pace of growth in June was the fastest in the almost four years since the AIA began gathering this data, according to a July 25 report.

Firms in three of the four major regions of the country reported gains in billings, showing a balance across regions and major construction sectors, which could indicate a more stable pattern of growth. By sector, residential firms continue to report strong growth, while commercial/industrial firms have now seen six straight monthly gains. Institutional firms saw the first monthly increase in billings since last summer.

This past downturn saw dramatic declines in the number of architecture positions nationally. While almost 19 percent of firms indicate that they have surpassed their pre-downturn high, and an additional 30 percent are about the same size that they were at the prior peak, according to the AIA. More than half of these surviving firms, however, are smaller at present, and some remain significantly below their previous levels. Almost a quarter of all firms are currently 25 percent or more below their staffing levels before the downturn.

These declines leave most firms below what they consider to be their ideal size. While about a quarter of firms feel that their current size is the ideal size, most would prefer to be larger. Over half of firms (54 percent) would like to be up to 25 percent larger, while almost one in five thinks that more than 25 percent larger is the ideal size. Interestingly, smaller firms are more likely to feel that their current size is their ideal size, while larger firms are more likely to feel that they would benefit from being larger.

Recently improved job growth, coupled with a buoyant stock market, has improved the outlook for both consumers and businesses. Consumer confidence scores increased from 80.5 in the first quarter to 83.0 in the second quarter, according to the Conference Board's Consumer Confidence Index, although they are not yet back to their pre-recessionary levels of over 100. Even more encouraging is that business confidence scores (on a different scale than their consumer confidence readings) averaged almost 63 in the first half of the year, according to the Conference Board's CEO business confidence survey, well above the average score of 58 in 2013
or 50 in 2012.