2015 2nd Quarter Economic Indicators
Construction Backlog Declines to 8 Months in Q1 2015
“Weather and a myriad of other factors always make the first quarter CBI difficult to interpret,” said ABC Chief Economist Anirban Basu. “A brutal winter may have postponed project-related work, including the signing of contracts. The first quarters of 2012 and 2014 also experienced CBI declines that effectively were reversed during the ensuing second quarters.
“However, there is a reason to believe seasonal forces were not the only factor in reducing CBI,” Basu said. “Sharp reductions in oil-field investment impacted a number of companies in the middle states, while firms in the West appear to have been disproportionately impacted by the West Coast port slowdown. Weather and the port slowdown represent temporary factors, implying that backlog should re-establish an upward trajectory during the months to come.
“Construction was hardly the only segment of the economy to be impacted by weather, labor disputes and lower energy prices,” said Basu. “The entire macro-economy failed to expand during the year’s initial quarter. Still, economic fundamentals remain relatively strong. Job growth continues to expand, unemployment is below 6 percent and wage gains are steadily building. With fuel prices still low, consumer spending is positioned to remain the primary driver of economic expansion. Residential construction also has picked up in recent months, with even the single-family market showing signs of life.”
Regional Highlights
- Were it not for the West, overall CBI would have actually increased during the first quarter.
- Backlog in the South, which is now adding more jobs than any other region of the country, is at the highest recorded level for the region in the history of the series.
- Forward-looking construction indicators have not deteriorated in the middle states despite a general decline in commodity prices during the past year.
Industry Highlights
- Despite a stronger U.S. dollar and weak export growth, CBI in the heavy industrial segment established a new high for the series during 2015’s initial quarter.
- Firms involved in the infrastructure segment also continue to get busier. Despite the impact of winter weather, backlog remained essentially unchanged during the first quarter compared to the end of 2014 and is up by nearly two months during the past year (to an average of 10 months).
- Given expected levels of consumer spending during the second quarter of 2015 and beyond and ongoing employment growth in professional services, health care, hospitality and financial services, the expectation is that
- backlog expansion in the commercial/institutional segment will resume during the months ahead.
Adapted from: http://www.forconstructionpros.com/press_release/12079787/construction-backlog-declines-to-8-months-in-q1-2015
A Strong Jump in Firm Billings in June
“Probably due in part to catch-up after a disappointing first five months of the year, billings at architecture firms soared to their strongest growth level since before the last recession. At 55.7, the June ABI national score holds out hope for solid growth in design activity continuing into the summer months. With healthy readings for new design contracts so far this year it was only a matter of time before the growing volume of new work would result in increased billings by firms. The June reading of 52.5 for new design contracts was solid, suggesting that new project activity is continuing to flow into architecture firms.
The strong June billings score was enough to lift all of the regions of the country back into positive territory. Firms in the Northeast had reported declining billings for nine straight months, so hopefully the June upturn is the beginning of a new round of regional growth. Additionally, firms in the Midwest reported stronger growth in billings than at firms in any other region.
In spite of the overall upturn in billings in June, firm specializations along the major construction sectors were reflecting a very different experience. Residential firms reported another decline in billings; their fifth straight decline. One reason for the falloff in billings at residential firms is likely due to the mix of single-family homes being constructed. Early in the recovery, upper-end custom homes were dominating the market. More recently there has been some improvement in entry-level homes that typically have much less design involvement. Additionally, after several years of very strong growth, the multifamily market may be beginning to peak for this cycle. However, any weakness in the residential sector has been more than offset by billings growth at institutional firms. Billings growth at these firms is at its highest pace of the past decade.”
– See more at: http://www.aia.org/practicing/AIAB106904