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Billings at U.S. architecture firms were off for
the fifth straight month in November. In comparison, the downturn in architecture
firm activity lasted only six months after September 11, 2001. However,
in this downturn each of the monthly losses have been relatively modest.
Also, inquiries for new work at firms have remained positive. Again, in
contrast, there were two months where inquiries declined in the aftermath
of September 11.
Business
conditions regionally continue to remain quite fluid. Firms in the West
still report weak business conditions, while firms in the South have reported
consistent gains during this recent period of weakness. In the last few
months, firms in the Northeast have reported weaker conditions, while
firms in the Midwest have seen improvement.
Residential firms report the strongest growth in
billings, but mixed practices (with less than 50% of billings in any major
sector) also are reporting billings gains. Firms concentrating in commercial/industrial
projects report the weakest conditions. However, firms in all specialization
categories are seeing increases in inquiries.
Soft spot
The Federal Reserve Board acknowledged at its recent meeting that the
economy currently is in a soft spot. There is substantial
evidence that the 4.0% growth achieved by the overall economy in the third
quarter will not be repeated in the fourth quarter. The employment report
for November also left little doubt that the economy is in a temporary
lull.
Business payrolls declined by 40,000 during the
month, and the national unemployment rate rose to 6.0%, its highest level
since the third quarter of 1994. However, a leading indicator for the
economy rose in November for the first time since June, pointing to a
possible return to growth early next year.
Firms are nervous
With the recent softening in business conditions, firms are understandably
nervous about prospects for 2003. We asked members of our panel for their
best estimates for next years billings.
Overall, firms see some improvement. About 40% of
firms expect billings at their firms to increase, about a third expect
them to remain flat, and a quarter are expecting declines. While there
is not much difference in the 2003 outlook across regions or by firm specialization,
there is a considerable difference across firms of different sizes.
Smaller firms (with annual billings under $500,000)
are generally optimistic about the coming year. Two-thirds of firms in
this category expect billings to increase next year, although most expect
the increases to be relatively modest. At larger firms (with billings
in excess of $5 million) the outlook is more pessimistic. Over 40% of
firms expect billings declines next year, while less than 30% expects
billings to grow.
Copyright 2002 The American Institute of Architects.
All rights reserved.
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This month, Work-on-the-Boards-survey participants are saying:
Recent congressional action on homeland security and terrorism
insurance are bright spots but will take time to trickle down.
68-person firm in the Northeast,
mixed specialization
Our receivables continue to agetoo bad theyre
not red wine!
9-person firm in the Midwest,
mixed specialization
Public work, especially schools and health clinics, remains
strong.
13-person firm in the West,
institutional specialization
Business conditions are soft. Contractors are returning bids
in days instead of weeks with a What do we need to do to get
this job? attitude.
54-person firm in the South,
commercial specialization
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