Survey results at the end of the second quarter show a decline from the Q1 end-of-quarter scores. Approximately 20 percent of respondents reported billings growth.
Only small firms with two to nine employees indicated billings in expansionary territory in the second quarter, posting an IDBI score of 53.8. Sole practitioners fell from a March score of 53.2 to a June score of 43.6. Larger firms remained in sub-par territory from March to June, indicating retreating billings over the quarter. Single month June scores for all firm sizes were below the three-month moving average score, perhaps indicating a loss of momentum across the board.
Interior design firms in the South continued a year-long streak of positive billings growth with a score of 53.6. Billings in the Midwest rose during the second quarter, showing positive billings, growth and a score of 52.4. Firms in the Northeast and West saw a decline in billings over the quarter.
Design firms specializing in single family and multi-family residential projects over the past four quarters have experienced a downward moderating trend, with the single family sector dipping into sub-50 scores during the second quarter. Commercial and institutional billings also fell into sub-50 territory with scores of 44 and 48, an indication of declining billings.
The design industry remains optimistic about the near term business conditions with 89 percent of survey respondents expecting conditions to be the same or better than they are now. The six-month business conditions index score of 59.6 for June is less than the score of 62.7 for March and 65.2 for December. While the design industry has registered a softer than expected second quarter, the ASID six-month interior design business conditions index, the Conference Board’s Expectations Index, and the Dodge Momentum Index taken together reflect an improving broader economy that will encourage spending on design services over the next six months.
The employment market remains solid well into its ninth year of expansion. Employers added 213,000 jobs to payrolls in June as the U.S. job machine continues to generate average net job gains of approximately 200,000 per month (over the past 12 months) despite growing concerns by businesses about a shortage of qualified workers. Architectural and interior design services job growth continues with net gains for both professions and an additional 2,300 jobs in the month of May, the largest gain since November 2017.
U.S. construction spending was $1.31 trillion in May at a seasonally adjusted annual rate, up 4.5 percent from $1.25 trillion in May 2017. The rate of residential construction spending is still on the rise, but capacity constraints are a concern as the search for available labor becomes increasingly difficult. The pace of public construction spending has been especially strong over the last several months, and while the pace of nonresidential construction has been steady, it is sizeably above its growth rate of a year ago.
Going forward, the U.S. economy remains on solid ground. Economic fundamentals for the economy and the consumer are in place and consistent with output increasing at a 3 percent annual rate, propelled by the federal fiscal stimulus. Sustained employment gains and household incomes have fueled growth in the consumer spending growth, supporting business investment and further employment gains, and creating an economic virtual cycle. However, while the drag from trade tensions is relatively small, it has increased uncertainty. It is too early and a very complex analysis to measure any short run disruptions.