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Firms Remain Optimistic Despite Growing Concern Over the Economy

Washington, D.C. – Today, the ACEC Research Institute released its Q2 2022 Engineering Business Sentiment report findings. This survey of 600 engineering executives across the engineering and design industry offers a comprehensive look at current and future conditions in engineering and the larger economy through a net rating scale. Download your copy of the report here.

The net ratings system used in the report takes negative responses and subtracts them from positive ones to reach a numerical score. The higher the number, the stronger the sentiment.

“Even though our industry is in its 7th straight quarter of growth, engineering firm leaders are tempering their optimism due to the news coming from the financial sector,” said John Carrato, Chair of the ACEC Research Institute. “Even a generational federal investment in America’s infrastructure can’t erase the business effects from weak monetary policy.”

The Institute’s Q1 survey found extreme optimism among engineering firm leaders both for their own financial picture (+88) and the industry (+82). Fast forward and that optimism remains largely intact at +84 and +80 respectively. However, growing concern over inflation and the health of the U.S. economy has weakened overall confidence.

Concerns about inflation increased significantly from +62 to +85 and future sentiment on the economy declined substantially by 26 points, standing at +16. Notably, smaller firms are seeing the greatest erosion of future business sentiment, with firms of 26-60 employees reporting the biggest drop in confidence.

Current sentiment remains very optimistic within all market sectors, although nearly half have had some decline in the past quarter. Sentiment is strongest in the water/wastewater (Net Rating +77) and roads and bridges (+76) sectors and weakest in residential real estate (+6Add New8) and telecommunications (+64) with both showing a drop of -4 and -5 points. Looking to the future, the largest change is in real estate with future sentiment for residential land development falling to -11 points and commercial real estate to -12.

Median firm backlog has increased from 10 to 11 months and 49 percent of responding firms report a backlog of one year or more. Fifty-four percent of respondents believe their firms will see an increase in backlog of projects over the next year, down from 66% last quarter.

Seventy-three percent of respondents predict there will be an increase in hiring over the next 12 months at their firms, down from 80% last quarter. Firm salaries are also up, with the average firm salaries for new hires up 10 percent over the past year. Thirty-one percent of small firms (1-25 employees) have increased salaries by more than 10 percent – the highest of any segment.

Fourteen percent of firms are already seeing an increase in projects related to the Infrastructure Investment and Jobs Act (IIJA) and another 73% of firms expect to see an increase at some point. However, 28% of small firms (1-25 employees) suspect they will never see an increase.

“The numbers in this survey show an industry that is cautiously optimistic but is also moving to hedge against inflation and economic uncertainty, said Joe Bates, a researcher with the ACEC Research Institute. “For policymakers, this survey should be taken as a clear signal to get inflation in check and restore confidence in the economy.”

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June 8, 2022

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