(11-20-19)
Profitability remains strong, but firms anticipate a slowdown in revenue growth in 2020. Business conditions showed signs of improvement at architecture firms in October, as the ABI score rebounded to 52.0, following flat or declining billings for most of the year so far (a score over 50 indicates billings growth). In general, architecture firms remain cautiously optimistic about the future, despite ongoing concerns about a potential economic downturn in the next year. Inquiries into new projects—and the value of new signed design contracts—were both also fairly strong this month, although slightly fewer firms reported growth in October than in September. Despite the overall encouraging numbers for the month, pockets of softness remain. Billings declined at firms in the Northeast for the ninth consecutive month in October and were flat at firms in the Midwest. Business conditions remained strongest at firms located in the South and continued to strengthen at firms located in the West, where they increased for the sixth month in a row. By specialization, firms with a multifamily residential specialization remained the only group to report increasing firm billings in October, while billings were essentially flat at firms with institutional and commercial/industrial specializations. Larger economy sees slow growth – Growth has continued in the larger economy recently, but generally at a slower pace. The Gross Domestic Product (GDP) increased at an annual rate of 1.9% in the third quarter of 2019, which is slightly below the growth reported in the second quarter (2.0% growth) and the first quarter (3.1% growth). It is also a lower growth rate than in the last two and half years, where GDP has grown at an annual rate of at least 2.0% every quarter in that period except for the fourth quarter of 2018. In addition, while nonfarm payroll employment rose in October, only 128,000 new jobs were added, in contrast to average monthly gains of 167,000 for the year so far, and 223,000 in 2018. However, architectural services employment has continued its steady growth, rising to a total of 201,600 total employees in September (according to the most recent available data). The sector has seen gains of 5,000 new positions so far this year, and the industry has now added back 49,600 of the 65,800 jobs that were lost during the Great Recession.