Q3 2019 Economic Indicators

Let’s look at some of the changes in the Construction Economic Indicators that I have witnessed since our last posting in August 2019. In this analysis, I’m diving into the Midwest and Southeast Regional numbers of the American Institute of Architects Architecture Billings Index (AIA ABI), and the Associated Builders and Contractors Construction Backlog Indicator (ABC CBI). In both cases, the Midwest Region numbers fall below the National and the Southeast Regional numbers – this may be an indication of a slowdown in our Ohio market during late 2020.

The AIA’s ABI for the Nation and the Southeast Region has been above 50 for most of the year, while the Midwest Region has been below 50 for the last two quarters (A score > 50 indicates growing architect billings, and a score <50 indicates a decline in architect billings). At the end of the 3rd quarter, the National ABI reported at 49.7, while the Midwest Region dropped to 45.3. The Southeast Region remained in growth territory at 52.3. This indicates that we most likely will experience a decreasing number of new opportunities during the 4th quarter of 2020.

The ABC’s CBI has shown a steady level of backlog at the National level, Midwest, and Southeast Regions throughout 2019. The Southeast Region is currently leading the way at 10 months of backlog, which is higher than the National level of 9 months. The Midwest Region has been steady all year with 7 months of reported backlog.

I monitor Miles-McClellan’s backlog monthly and compare it to both the regional and national levels. We have been steady at about 25% above the national average. This results from both good and bad. The good – we have excellent relationships with our customers that lead to high levels of repeat business. The bad – industrywide manpower issues have prevented work from being put-in-place during 2019, pushing backlog into 2020. I expect to see backlog remain high throughout 2020 as our industry continues to solve the skilled manpower issue.

Because of the projected high backlog, we are carefully monitoring our Superintendent capacity and our skilled trade workforce. We want to continue to serve our clients well, and therefore, we know we cannot overcommit our resources.

If you would like to talk through the numbers above – including detail on our backlog – please give me a call. I always enjoy the opportunity to discuss our industry on both macro and micro levels.