ASID is pleased to release its Interior Design Billings Index 4th Quarter 2017 Report.
The report provides insight on the current business conditions for the interior design industry, including:
• A rundown and analysis of the market segments and geographic regions that enjoyed a positive fourth quarter, 2017
• A look at the key indices from the report and what they suggest for the design industry over the next six months
• An evaluation of how interior design practitioners interpret the economic climate
HIGHLIGHTS
An increasing number of respondents reported a pull back in business conditions since mid-2017.
The pace of billings growth dropped during the fourth quarter of 2017, with the December ASID Interior Design Billings Index (IDBI) score dipping to 47.8 from September’s score of 55.6 (scores about 50 indicate industry expansion, while those below 50 indicate contraction). The decelerating trend, combined with a sub-par inquiries score of 47.8, suggests that market conditions going into 2018 are somewhat indefinite. The December index is weaker than its three-month moving average of 52.3, indicating a continuation of declining scores reported since mid-2017.
Fourth quarter demand for interior design services varied across the four size cohorts.
Sole practitioner design firms reported a modest decline in quarterly performance on a three-month moving average, but remained in expansionary territory in the fourth quarter. Slightly larger firms with two to nine employees maintained a positive trend and showed a three-month moving average of 58. Larger firms of 10 to 25 employees fared less well during the year, reporting sub-50 scores in five out of 12 months in 2017.
Billings growth varies across regions for interior design services.
Three of the four regions, Midwest, South, and West all reported strong (greater than 50) three-month moving average IDBI scores in December, finishing the year with strong billings growth. Interior design firms in the Northeast, however, experienced a notable fall off in business, registering an IDBI score of 40 at the end of the fourth quarter.
Business conditions for the year were positive for residential design services, but commercial and institutional design services struggled.
Design firms specializing in single-family and multifamily residential projects reported growth throughout the year, posting scores above 50 every month. The exception was December, when firms serving the single-family design market reported an IDBI score of 49.2. Commercial and institutional design firms displayed an uneven and slower paced pattern of billings in 2017. Firms specializing in institutional projects rose to a score of 51.7 in December from 31.7 in September. Although the three-month moving average for institutional design firms was 49.4, and better than its third quarter score, their performance remained in contractionary territory. The December commercial IDBI three-month moving average score was 48.8, up slightly from a September score of 47.7.
Six-Month Outlook: Stronger Business Conditions Expected.
Looking forward, the design industry remains optimistic about the near term outlook for business conditions. The six-month business conditions index score of 65.2 for December is well above the 56.8 recorded at the end of the third quarter and indicates continued buoyancy. The ASID six-month interior design business conditions index, the Conference Board’s expectations Index, and the Dodge Momentum Index remain at elevated levels and signal a positive track for the design and construction industries.
Labor Market Continues to Expand.
U.S. payroll employment in September showed a meager gain of 38,000 jobs, a direct result of hurricanes. The job machine in October and November kicked in, averaging 230,000 additional monthly jobs, but dropped off to 148,000 in December. The unemployment rate was unchanged at 4.1 percent during each of these months. Architectural and interior design services job growth continues with monthly net gains in jobs for both professions.
Construction Spending Showing Strong Gains.
Construction spending totaled $1.257 trillion at a seasonally adjusted annual rate in November, a record level and 0.8 percent higher than the upwardly revised October rate, and 2.4 percent higher than the November 2016 rate. The pickup was driven by increases in both private residential and nonresidential outlays. Public construction spending, meanwhile, registered a small monthly gain after three months of large increases. The data now shows a lift from the resumption of construction in the aftermath of Hurricanes Irma and Harvey.
According to Jack Kleinhenz, ASID economist:
Although the momentum of ASID billings slowed in the last few months of 2017, this should not be a cause for concern as seasonal factors are at work and a similar pattern was apparent in the past. It is important to look at the year as a whole, and all but one month saw IDBI scores in positive territory. The six-month expectations outlook index remains at a very high level, an encouraging sign that current business will improve in the coming months. December’s IDBI score of 65.2 is a significant improvement from the score of 58.6 recorded in September.
The full report may be downloaded at https://www.asid.org/resources/resources/view/resource-center/192, and a recording of ASID’s Feb. 20 webinar can be accessed at https://attendee.gotowebinar.com/recording/98699149682655746?assets=true.