Q1 2024 Engineering Business Sentiment Shows Continued Industry Optimism

The ACEC Research Institute released its Engineering Business Sentiment Report for the first quarter of 2024. Institute Senior Researcher Joe Bates and ACEC Senior Director of Economics and Private Markets Thomas Grogan shared the Report’s findings in a comprehensive online class, which can be viewed here. Joe also recorded a podcast with SVP of Communications and Marketing Jeff Urbanchuk to give a high-level view.

For this Report, more than 600 member-firm leaders from around the country and from all sizes were asked to weigh in on the industry’s current state and direction. The survey uses a Net Rating methodology, which is calculated by subtracting the negative ratings from the positive ones. Therefore, a positive Net Rating indicates the overall sentiment is optimistic, while a negative Net Rating indicates an overall pessimistic sentiment. The higher the number, the stronger the sentiment.

The Report revealed increased bullishness on the overall state of the U.S. economy and continued widespread optimism for both the industry and firms. On the latter, sentiment remains extremely high, with firms hitting a +87 and the industry coming in at +84. Future industry sentiment is positive in most sectors, including Transportation (Roads/Bridges/Transit/Airports), Energy and Utilities, and Water/Wastewater. The Net Rating for Science and Technology Sector saw a significant increase (+13), while Commercial Real Estate saw the most precipitous decline (-20 points).

On the economy as a whole, there was a dramatic improvement in future sentiment, with nearly all segments (regions and firm sizes) feeling more optimistic than last quarter.  The Net Rating for the economy came in at +35 – an increase of seven points over the last quarter and 23 points higher than a year ago. That increased optimism likely can be attributed, at least in part, to waning concern over the impact of inflation (the Net Rating fell from +62 to +39). Also diminished were fears of recession, which fell 25 points from a year ago.

“We’ve been talking about the longest-awaited recession in the history of the United States,” said Bates. “We’re still waiting for it.”

Both Bates and Grogan pointed to some potential warning signs in the Report. Workforce shortages continue to plague the industry when huge numbers of jobs are being created. Unemployment within the Engineering and Design Services sector is at 2.1 percent, an almost unheard-of low. More than half of firms (51 percent) continue to turn down work because of workforce shortages. “We don’t have a lot of people [to fill] jobs, but we are creating tons and tons of them,” said Bates.

On inflation concerns, Grogan noted that perception is everything. “Things are just more expensive right now, and that is what people remember.” Even as the price of goods has started to trend down, the price of services has continued to increase. With 70 percent of household budgets going to services, this is a metric that needs to be monitored.

“The services cost is tough to get under control,” said Grogan. “While the cost of a Snickers bar or a pair of sneakers might be a little cheaper, the total cost of getting a haircut or being served your coffee is continuing to rise.” Those increases, he said, are bleeding into the EDS industry, with real world impacts to the bottom line. “Project delivery costs are significantly higher than they were three years ago.”

Bates concurred. “Even though we’re seeing a levelling off of inflation, it’s just so much more expensive all around than it was a handful of years ago.”