by Jennifer Riskus
AIA Research Specialist

Summary: Several atypically warm months to start the winter led to elevated billings, which slowed in February with the arrival of more seasonably cold weather. Declines in billings were reported in nearly every region of the country, although the pace continued to pick up in the South. Residential billings also continued to stabilize after months of decline in 2006.

Although the pace of growth for both billings and inquiries slowed somewhat in February, the Architecture Billings Index (ABI) remained above 50 with a score of 53, indicating that growth continues to be solid. As with billings, inquiries also slowed slightly in February after showing a surge at the very beginning of the year, and yet remain strong enough that there presently is no need for concern.

With the arrival of winter weather after an unseasonably warm December and January, the pace of growth slipped in all regions of the country in February, except the South, where it accelerated slightly. The pace in the Northeast in particular began to decline after having been extremely elevated recently. The slowdown in the West that began in December continued, and the Midwest also eased slightly, but scores for both remain above 50, a good sign that growth will continue into the spring.

Housing recovery not imminent
Despite the score for the residential sector reaching the highest it has been in over a year, a recovery is not imminent. The score indicates that the sector is no longer in freefall, but instead has moderated to a more stable level. Recent data on housing starts from the Census Bureau support this, indicating that while single-family homes continue to decline, growth in multifamily housing is ongoing. Growth in the commercial/industrial and institutional sectors fell slightly this month, but remains elevated overall.

In line with slowing growth, the Bureau of Labor Statistics reported that construction employment declined sharply in February, with a loss of 62,000 jobs after gains in January. February also brought a revision to GDP for the fourth quarter of 2006, as it was revised to an annual growth rate of 2.2 percent (down from a preliminary estimate of 3.5 percent, primarily due to downward revisions to private inventory investment and personal consumption expenditures for goods). In addition, consumer sentiment (as reported by the University of Michigan Consumer Sentiment Index) fell by more than five points in February, although inflation expectations held steady for the month.

Defined scope, good communications shape profitability
This month’s special question was a follow-up to our January question about project profitability. When asked to select the one characteristic most important to making a project profitable, nearly one third (31 percent) of Work-on-the-Boards panelists identified a clearly defined scope from the beginning. Twenty-eight percent of respondents indicated that they thought good communication/trust between the firm and the client was the most important characteristic. More than half of respondents (53 percent) indicated that a client’s poor decision-making skills would be the characteristic most important to making a project unprofitable.

Respondents working at firms with residential and institutional specializations were more likely to indicate that good communication/trust was the most important characteristic to making a project profitable, while those at firms with a commercial/industrial specialization were more likely to select clearly defined scope.