Proposal activity for architecture, engineering and construction (A/E/C) firms increased significantly in the 1st Quarter of 2023, according to PSMJ’s Quarterly Market Forecast (QMF) survey. The predictive measure of the industry’s health rebounded to a net plus/minus index (NPMI) of 32.8 in the first three months of the year. This followed the 8.0 NPMI in the 4th Quarter of 2022, which marked the lowest level since the final quarter of 2020 and the second-lowest NPMI recorded in the last 10 years.
PSMJ President Greg Hart noted that the 1st quarter results are a pleasant surprise, especially since data was collected after the Silicon Valley Bank collapse and amid continuing interest rate hikes and recession predictions. “I don’t think anybody expected this kind of recovery,” he said. “But inflation is cooling and there are some positive signs in the housing market, so maybe we’ve found the bottom.”
First quarter results have historically been the strongest throughout the history of the QMF survey, which may play some part in the jump in project opportunities. In the last 10 years, the first quarter NPMI averaged 45.2, with the results weakening in subsequent quarters. The average NPMI for the 2nd quarter since 2013 is 36.5, with the third and fourth quarters averaging 29.0 and 25.7, respectively. Year-over-year, the NPMI for the first three months of 2023 was down substantially from a near-record NPMI of 60.2 reported in the first quarter of 2022.
PSMJ’s proprietary NPMI is the difference between the percentage of respondents who say that proposal opportunities are growing and those reporting a decrease. In addition to overall activity, the QMF surveys A/E/C firm leaders about their proposal activity experience in 12 major markets and 58 submarkets.
Private Sector Construction Markets Struggle, Publics Thrive
Firms working in private-sector markets continue to report historically low levels of proposal activity, while those in the public sector perform better, as the chart below indicates. Environmental topped all 12 major markets with an NPMI of 71.4, followed by Water/Wastewater at 70.8. Transportation continues to thrive, aided by the Infrastructure Investment and Jobs Act (IIJA), with an NPMI of 65.5. Energy/Utilities remains solid, repeating its fourth-place finish from the prior quarter and a near-exact NPMI of 55.1 (down from 55.2).
Since the 1st quarter of 2019, the Energy/Utilities market has been out of the top five only once (the 2nd quarter of 2021), and the Water/Wastewater market has missed the top five just twice.
The biggest surprise of the 1st Quarter may be that Education was the fifth-strongest among the major markets with an NPMI of 42.2. This is the first time that Education hit the top five since the 2nd quarter of 2018. The Higher Education (NPMI of 45.3) and K-12 (42.3) submarkets drove the resurgence.
Related Stories
Market Data | Apr 16, 2019
ABC’s Construction Backlog Indicator rebounds in February
ABC's Construction Backlog Indicator expanded to 8.8 months in February 2019.
Market Data | Apr 8, 2019
Engineering, construction spending to rise 3% in 2019: FMI outlook
Top-performing segments forecast in 2019 include transportation, public safety, and education.
Market Data | Apr 1, 2019
Nonresidential spending expands again in February
Private nonresidential spending fell 0.5% for the month and is only up 0.1% on a year-over-year basis.
Market Data | Mar 22, 2019
Construction contractors regain confidence in January 2019
Expectations for sales during the coming six-month period remained especially upbeat in January.
Market Data | Mar 21, 2019
Billings moderate in February following robust New Year
AIA’s Architecture Billings Index (ABI) score for February was 50.3, down from 55.3 in January.
Market Data | Mar 19, 2019
ABC’s Construction Backlog Indicator declines sharply in January 2019
The Construction Backlog Indicator contracted to 8.1 months during January 2019.
Market Data | Mar 15, 2019
2019 starts off with expansion in nonresidential spending
At a seasonally adjusted annualized rate, nonresidential spending totaled $762.5 billion for the month.
Market Data | Mar 14, 2019
Construction input prices rise for first time since October
Of the 11 construction subcategories, seven experienced price declines for the month.
Market Data | Mar 6, 2019
Global hotel construction pipeline hits record high at 2018 year-end
There are a record-high 6,352 hotel projects and 1.17 million rooms currently under construction worldwide.
Market Data | Feb 28, 2019
U.S. economic growth softens in final quarter of 2018
Year-over-year GDP growth was 3.1%, while average growth for 2018 was 2.9%.
