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Washington, DC – Recently, the ACEC Research Institute released its Engineering Business Sentiment report findings for the first quarter of 2024.
New data shows engineering firms are dramatically more optimistic toward the U.S. economy than they were last year, and that wage inflation is the biggest single concern among firm executives as they head into 2024.
“Engineering firms are entering 2024 with strong backlogs of work and optimism,” said Mike Carragher, chair of the ACEC Research Institute. “This situation allows firm leaders to step back and think about strengthening their long-term strategies and investing in their people. They are the most important and valuable component of our businesses.”
Download your copy of the report here.
The ACEC Research Institute has now conducted the Business Sentiment Survey for ten quarters, and we’ve found that many sentiment survey metrics are leading indicators of future economic performance,” said Joe Bates, senior research consultant with the ACEC Research Institute.
An analysis compared past sentiment survey data to resulting macro-economic data. The analysis shows that survey data such as current and future sentiment on the U.S. economy and the engineering industry leads by one to two quarters on macro-economic trends like employment, housing starts, and inflation.
Survey Highlights:
Biggest Concerns for 2024
Wage Inflation is the single biggest concern among firm executives as they head into 2024 (74% for existing staff and 73% for new hires). Political disruption from the 2024 presidential election follows at 56%, and 40% of firms are concerned about project delivery delays or cancellations due to high interest rates.
Anticipation of Likelihood of Recession Diminishing
Among the engineering firm executives that responded to the survey, anticipation of the likelihood of a recession in the next 6 months has declined another point from last quarter and is down 25 points from a year ago.
Project Selectivity and Workforce Shortages
In the past three months, 51% of firms have continued to turn down work due to workforce shortages, similar to one year ago. The workforce shortage is having the least impact in the South, where only 40% have turned down work.
Among firms turning down work, 88% are turning it down in favor of being more selective with their projects, up from 80% a year ago. Sixty percent of firms are turning down less profitable work, slightly more than last year at this time. One-fourth (24%) of firms are being forced to turn down good, profitable work due to workforce shortages.
Sentiment by Sectors
Future industry sentiment (12 months from now) is positive in most sectors including Transportation, Energy and Utilities, and Water and Wastewater. Current sentiment also remains very optimistic within most market sectors. Sentiment is strongest in Roads & Bridges (Net Rating +86), and Airports (+82), Wastewater (+81).
Of note, the Net Rating for the Science and Technology sector saw a significant increase year-over-year (+13), while the Commercial Real Estate sector has seen the most precipitous decline over the past year (-20 points).
Artificial Intelligence (AI)
The report found that half (52%) of firms have an artificial intelligence (AI) strategy in place or are working on one, and 63% of firms believe that AI will have a positive impact on their firm in the coming year.
About the Survey
The survey offers a comprehensive look at current and future conditions in engineering and overall sentiment toward the economy using a “Net Rating” system with zero being neutral. The higher or lower the number, the stronger the sentiment (positive or negative). This quarter’s respondents included 571 executives across the engineering and design services industry.
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