The ACEC Research Institute recently released two reports: 2022 Economic Assessment of the Engineering & Design Services Industry and Engineering Business Sentiment 2023 Q1. Both reports paint a picture of an engineering and design services industry that has roared back from its pandemic-era lows and is poised to further build on its post-COVID-19 gains.
Now in its third annual release, the report focused on the key economic drivers of the engineering and design services industry. As in its two previous iterations, it sought to describe, measure, and analyze the economic significance of the industry and to highlight its inextricable link to the overall health of the U.S. economy.
The report notes the “outsized impact” COVID-19 had on the engineering and design services sector, pointing to construction projects that were disrupted, delayed, or scrapped altogether. The perfect storm of the pandemic and its concurrent economic downturn spurred a 7 percent decline in A/E activity in 2020. The story here is of the resurgence in 2021, with the industry recovering its 2020 losses—plus an additional $9 billion.
These successes can be felt throughout the industry, with bullish year-over-year metrics across the board. Highlights include:
More projects. More sales. More industry workers earning higher salaries. With trends like these, it is little surprise that current sentiment for firms and the industry overall remains very to extremely optimistic within all market sectors. For this report, nearly 600 member firm leaders from around the country and from firms of all sizes were asked to weigh in on the current state of the industry and its direction. The survey used a Net Rating methodology, which is calculated by subtracting the negative ratings from the positive ones. Therefore, a positive Net Rating indicates overall sentiment is optimistic, while a negative Net Rating indicates an overall pessimistic sentiment. The higher the number, the stronger the sentiment.
The Net Rating for firms’ overall finances was +84 and +82 for the engineering and design services industry, out of a possible +100. Respondents were far less optimistic about the state of the U.S. economy, with a Net Rating of +12. It is worth noting that this is an increase of 12 points from the Q4 survey and +28 points from Q3 2022. Still, despite continued economic pessimism, respondents from across the industry expressed deep confidence in their own sectors, with particularly strong sentiment among Transportation – Roads and Bridges (Net Rating +79), Energy and Utilities (+78), Health Care Facilities (+75), and Water/ Wastewater (+74).
When respondents were asked to look ahead to the next 12 months, recession (87 percent) and inflation (86 percent) were the greatest concerns fueling negative future sentiment. Respondents also pointed to spiking interest rates (76 percent), economic uncertainty (73 percent), and workforce shortages (72 percent) as key concerns. Regarding the latter, 69 percent of respondents predict an increase in hiring over the next 12 months, up from 65 percent who said that in the Q3 survey. Nearly 9 out of 10 respondents indicated their firm has at least one open position, with the median number of openings at five.
Learn more about the ACEC Research Institute at ACECResearchInstitute.org.