The U.S. construction industry continues to face headwinds as new design activity slowed for the third straight month in April, reflecting a cautious market environment driven by economic uncertainty, financing challenges, and inflationary pressures.

The American Institute of Architects (AIA) released its monthly Architecture Billings Index (ABI), a leading indicator of nonresidential construction activity, showing the index dropped from 44.1 in March to 43.2 in April. Since any score below 50 indicates a decrease in billings, the data suggests fewer projects are progressing through the early design stages, which could translate into lower construction volume in the coming months.

Construction Demand Weakens Despite Strong Backlogs

According to the AIA, project inquiries and signed design contracts also fell, pointing to a broader slowdown in client engagement and project starts. The project inquiries index fell to 48.0, and the design contracts index dropped to 43.3, marking the 14th consecutive month of contraction in new contracts.

“Uncertainty as to the economic outlook continues to hold back progress on new construction projects,” said Kermit Baker, AIA’s chief economist. “Despite the slowdown in billing activity, architecture firms continue to navigate this business cycle quite effectively, as staffing at firms remains relatively stable and project backlogs are holding up better than expected.”

This paradox—weakening billings alongside steady staffing and backlogs—suggests firms are still managing ongoing work, though new opportunities are slowing.

All U.S. Regions and Key Sectors Show Contraction

April’s ABI data indicates widespread softness across all major regions, with no part of the country showing growth. Regional billings included:

• South: 46.2
• Midwest: 44.4
• West: 42.1
• Northeast: 40.2

Sector-specific readings were similarly discouraging, with all major market sectors contracting:

• Institutional projects: 46.3
• Mixed practice firms: 47.6
• Commercial/industrial sector: 40.5
• Multifamily residential: 40.8

The commercial and multifamily sectors, in particular, continue to suffer under tight lending standards and shifting market demand, particularly in urban areas still recovering from post-pandemic adjustments.

Looking Ahead: Can the Market Rebound in 2025?

Despite the prolonged dip in design activity—28 of the past 31 months have shown declining billings—the architecture industry remains cautiously optimistic. Firms are relying on strong backlogs and institutional work (such as healthcare and education) to carry them through the slowdown, while keeping an eye on federal infrastructure funding and a possible interest rate pivot that could stimulate new investment.

However, analysts caution that persistent inflation, high construction costs, and restrictive lending continue to dampen investor confidence and delay decisions on large-scale projects.

In the short term, firms may need to focus on renovations, adaptive reuse, and publicly funded infrastructure projects to sustain momentum while waiting for stronger signals of a market rebound.

Originally reported by US Glass MAG.