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ASID Interior Design Billings Index (IDBI) - 2018 Q4 Report

Fourth quarter billings and inquiries down. 

The ASID Interior Design Billings Index (IDBI) score of 44.1 was in contractionary territory for December, with its three-month moving index only slightly higher at 49.1. Inquiry scores were only slightly greater, with December inquiries recording a score of 42.8, and the three-month moving average at 48.8. Scores above 50 indicate industry expansion, while those below 50 indicate contraction. 

Billings’ growth shows mixed results across size cohorts. 

With the exception of the sole practitioner’s score of 52.4, firms across all size cohorts reported sub-50 three-month moving average scores in December. Firms of between 2 and 9 employees reported 45.5; firms with 10 to 25 employees, 45.8; and firms with more than 25 employees, 33.0. 

Billings’ growth divided geographically in fourth quarter. 

Fourth quarter billings scores for both AIA and ASID show that billings were up for the Midwest and Northeast regions of the country. For their three-month moving averages, design firms in the Midwest reported a score of 54.4, and the Northeast, 52.8. Firms in the West dropped slightly from September to a still positive 50.0, while the South fell to 43.9. 

Fourth quarter billings uneven across market sectors. 

Single-family (48.1) and multifamily (44.1) residential projects remain below the expansionary scores reported for the same period a year ago. Institutional and commercial sector billings recorded scores of less than 40, indicating billings reductions month-over-month for those sectors. 

Six month outlook – economy expanding but at a moderating pace. 

The design industry remains cautious about near term business conditions suggesting that spending may be reaching its cyclical peak. The majority of respondents reported that business is expected to be about the same over the next six months. While a quarter of the respondents believe business conditions will be better than now, one in five indicated they believe they will get worse. The six-month business conditions index score for December of 51.7 represents the steady decline in outlook since March (62.7), June (59.6), and September (54.6). Looking forward, weakening trends in the ASID Six-Month Business Conditions Index, the Conference Board’s Expectations Index, and the Dodge Momentum Index suggest that growth in the economy and the design industry are moderating going into 2019. 

Labor market continues at solid pace. 

The pace of job creation in the U.S. has been solid and unemployment rates are the lowest they have been in almost 50 years. The December employment report showed the economy added another 312,000 jobs in December, and the fourth quarter was the strongest in several years. Approximately 2.6 million jobs were added to payrolls in 2018, averaging 220,000 per month. While architectural job growth continued in 2018 with net gains every month, interior design employment declined in October and November. This is the first pull back since April 2011. 

Construction spending remains firmly above its year-ago level. 

Construction spending totaled $1.309 trillion at a seasonally adjusted annual rate in October, 4.9 percent higher than in October 2017. Total residential and nonresidential outlays are up solidly this year, as is private and public construction spending. Private residential construction increased 1.8 percent year-over-year. Private nonresidential spending increased 6.4 percent over 12 months. Public construction spending, comprised of public buildings and infrastructure, increased 8.5 percent for the year. 

According to Jack Kleinhenz, ASID economist: 

The year 2018 was extraordinary with economic activity supported by strong job growth, wage increases, relatively tame inflation, and household net worth climbing to new heights. As we turn the calendar, however, we enter a very complicated economic environment. While economic growth should remain positive through the end of 2019, the pace of growth is expected to slow. The impact of income tax cuts and government spending will dissipate and modulate personal consumption spending. Higher interest rates associated with Federal Reserve monetary tightening have weighed on the pace of the housing market. Uncertainty has increased as higher global tariffs and the possibility of more to come have created turbulence in financial markets. Adding significantly to this mix is the uncertainty generated by the U.S. government’s partial shutdown, which continued for more than a month, making it increasingly difficult to assess the economy.