Falling Demand for Architects a Warning Shot for Industry

The American Institute of Architects said Wednesday that its monthly billings index, which measures the demand for design services, fell to its lowest point since May 2012, a warning shot for two value sectors that this year have looked more like growth sectors.

The Architecture Billings Index for August fell to 47.2, down from 50.1 in July. Numbers below 50 indicate a decrease in billings. Three of the four regions surveyed—Northeast, South and Midwest—were below 50. The West region was above. The index had been bouncing around the 50 mark for the past six months, but with the latest reading a growth phase for architects that began in 2012 is “beginning to face headwinds,” AIA economist

Kermit Baker

said. Since no construction project can begin before architects put the proverbial pen to drafting paper, the weakness in the AIA index could spell trouble, especially for the industrials and materials sectors, which have looked strong so far this year. The materials sector is up about 16% this year. A few stocks have had outstanding years.

Martin Marietta Materials

MLM 0.36%

is up 55%.

Vulcan Materials

VMC 0.36%

is up 50%. In fact, 64% of the stocks in the materials sector are trading above their 200-day moving average, a sign of long-term momentum, according to data from barchart.com. The industrials sector is doing even better, up 22%, and all but six of its components are up on the year. In fact, according to barcharts, 80% of the sector’s members are trading above their 200-day moving average. If the architects are right, though, investors may find they overbid some of these stocks. Write to Paul Vigna at paul.vigna@wsj.com

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