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Slight Decline in Monthly ABI
Index Drops Below 50

The Architecture Billings Index slipped 5.6 points to 49.1 in August, a sign that architecture design services decreased for the month.

The Architecture Billings Index slipped below its benchmark 50 level in August, a sign that design services declined slightly for the month.

After being in positive territory for most of 2015, the ABI dropped to 49.1 in August from 54.7 in July. Scores above 50 indicate an increase in architectural design services, while score below 50 point to a contraction.

The American Institute of Architects maintains the ABI to reflect the approximate 9-12 month lead-time required for most building projects to get from the architecture billing stage to actual construction.

"Over the past several years, a period of sustained growth in billings has been followed by a temporary step backwards," Kermit Bakers, chief economist for the AIA, said. "The fact that project inquiries and new design contracts continue to grow at a healthy pace suggests that this should not be a cause for concern throughout the design and construction industry." The architectural organization also maintains a new projects inquiry index, which declined to 61.8 from 63.7 the previous month.

Regional averages are as follows: Midwest, 56.1; Northeast, 46.8; South, 53.8; West, 50.2. A sector index breakdown: institutional, 53.7; mixed practice, 52.8; commercial and industrial, 49.7; multifamily residential, 49.5.

American Institute of Architects website link:

Construction costs have fallen considerably of late, and more widespread price drops were recorded in September, the latest survey by IHS Inc. and the Procurement Executives Group (PEG) shows.

PEG's headline Engineering and Construction Cost Index registered a 43.8, down from 45.7 in August and well below the neutral mark, according to For Construction Pros, a website that serves the construction industry. This index has not shown rising costs since December.

A reading above 50 reflects upward pricing, while a reading below 50 means prices are dropping. The headline index is comprised of weighted composite scores of the materials-equipment and subcontractor indices. The September materials-equipment index fell to 41.6, down from 44.2 in August, and is the lowest reading since February 2015 and the second lowest score in the last four years.

Prices dropped for 11 of the 12 components tracked by the survey, including steel products, such as fabricated structural steel, carbon steel pipe and alloy steel pipe, as well as turbines and pumps. Ready-mix concrete was the only material to gain in price.

The subcontractor labor index registered 49.0 in September. This marks the second consecutive month below the neutral mark. Subcontractor labor prices rose in the Northeast, stabilized in the South and fell in the West.

"Turbine prices have been trending sideways to downward in 2015. Turbines face a combination of softer demand, falling input costs and a strong dollar that hurts exports and forces competition against imports," John Anton, principal economist for IHS pricing and purchasing, said.

"Steel and copper are down sharply. Steel is the biggest input and is down over 23 percent," Anton said. "Coupled with a strong dollar that hurts exports and lowers the price of imports, it is no surprise turbines are declining. More price weakness is expected for 2016, as many of the negative factors listed above are just beginning to be priced in."

The six-month forward-looking headline expectations index rose to 50.3 in September, as slightly stronger pricing over the next six months has been forecast. The materials/equipment expectations index fell to 47.7 in September from 48.8 in August.

Nine components registered lower price expectations, led by electrical equipment and heat exchanges. But ready-mix concrete has been forecast to rise. Future subcontractor labor costs in the U.S. moved above the neutral mark, with the South leading in higher prices.

For Construction Pros website link:

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July 17, 2019, 8:32 pm PDT

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