Business conditions remained generally strong at architecture firms in August. The Architecture Billings Index score for the month ticked back up to 53.3 from 51.0 in July, as more firms reported an increase in billings. Inquiries into new projects also increased modestly in August from July, while the value of new design contracts held steady at the same rate of growth it has been at for the last two months. Many firms are still struggling to find enough employees to meet the amount of work they have coming in.
However, business conditions remain mixed by region of the country. Billings softened for the third consecutive month at firms located in the Northeast in August, and have declined for all but two months of the year so far. And while billings continued to rise at firms located in the West, fewer firms reported billings growth in August than they have in several months, and the pace of growth also declined slightly at firms located in the Midwest. Business conditions held steady at firms located in the South, where they were strongest overall for the second month in a row. In addition, firms of all specializations reported an increase in billings in August, with the strongest conditions reported by firms with multifamily residential and institutional specializations.
Conditions continued to be more mixed in the broader economy in August. Hiring remained strong, as nonfarm payroll employment grew by 315,000 positions, and architecture services employment added an additional 1,100 new positions in July, the most recent data available. However, inflation also continued to rise in August, when many had expected to see it level out or even start to decline. And while energy prices continued to moderate, they still remain far above the levels of one year ago, and food prices also continued to grow at a higher pace than expected. Because of this, the Federal Reserve is expected raise interest rates by yet another 0.75% during their meetings in late September, with some projections anticipating an increase of as high as 1.0%.
The latest edition of the Federal Reserve’s Beige Book report, released Sept. 7, also showed broadly mixed conditions across the country in the previous six weeks, with half of the districts reporting growth and the other half reporting softening conditions. Home sales fell in all 12 of the districts, and residential construction remained constrained by supply chain issues, which will only be exacerbated if a freight rail strike occurs. The report also showed broad softening in commercial real estate, particularly in demand for office space.
