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July drop for architecture services, construction backlog

Demand for U.S. architecture services remains sluggish as measured by architecture billings, project inquiries and signed contracts.

The American Institute of Architects’ Architecture Billings Index, a barometer of future construction spending, posted a lackluster reading of 40 in July, according to a new report. Any score below 50 indicates a decline in billings.

The billings score was unchanged from June. Inquiries for new projects fell from 49.3 in June to 49.1 in July. The July reading for newly signed contracts was 41.7, down from 44.0 in June.

“It’s clear the pandemic continued to contribute to uncertainty in business conditions, especially as cases spiked in states across the country,” AIA Chief Economist Kermit Baker said in a statement. “While clients expressed interest in exploring new projects, many are hesitant to sign onto new contracts with the exception of the multifamily residential sector, which came close to seeing billings growth in July.”

All four sectors measured in the July figures were underwater, though multifamily residential fared best with a score of 47.5. Next were mixed practice (44.0), institutional (39.5) and commercial/industrial (35.4).

By region, the breakdown was West (40.9), South (40.7), Midwest (40.1); Northeast (36.8).

In mid-August, the Associated Builders and Contractors reported that its Construction Backlog Indicator declined to 7.8 months in July, down 0.3 months from June. The reading is based on a July 20-Aug. 5 survey of ABC member firms.

“Many contractors are quickly working through existing backlog,” ABC Chief Economist Anirban Basu said in a statement. “Because the virus remains deeply problematic and many communities are rolling back reopening plans, the partial economic rebound observed in May and June is set to flatten. The implication is that while many contractors will continue to work through backlog for the balance of 2020, it may be difficult to secure work for 2021, as fewer projects are bid out and project starts become increasingly rare.”

“There are exceptions, of course,” Basu said. “Backlog in the heavy industrial category has increased, and many contractors are reporting more activity in fulfillment and data center construction as the e-commerce boom persists. But with project financing becoming increasingly challenging and with state and local governments in rough fiscal shape, the nonresidential construction environment is not shaping up to be a positive one, absent a meaningful infrastructure package.”

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