ECONOMIC OUTLOOK

Georgia's Engineering Sector Shows Optimism: A 2024-2025 Economic Perspective

Brett Hillesheim

As the latter half of 2024 approaches and early 2025 comes into view, the economic outlook and industry sentiment for Georgia’s engineering sector appear cautiously optimistic. Comprehensive data from the Georgia Chamber’s Executive Insights Survey and the ACEC Research Institute's Business Sentiment Survey provide a nuanced understanding of prevailing trends and future expectations, revealing a landscape characterized by growth opportunities, technological advancements, and persistent challenges.

Economic Optimism In Georgia

According to the Georgia Chamber’s Executive Insights Survey conducted in January 2024, there is robust confidence among business leaders regarding the state's economic future. Over 1,000 CEOs participated in this survey, with 83% representing companies headquartered in Georgia. An overwhelming 77% of executives expressed optimism about the state’s economy, marking a 17% increase from the previous year. Additionally, 85% of companies are expected to increase revenue, 70% are projected to boost full-time employment, and 70% plan to enhance capital investments over the next 12 months.

This optimism is driven by several key factors. Georgia's population growth continues to be a significant driver of economic expansion. The state’s favorable business environment, characterized by competitive tax policies and strategic economic development initiatives, has made it an attractive location for both established companies and new ventures. Furthermore, the Georgia Chamber’s survey highlights the positive impact of recent economic development announcements, which have bolstered business leaders’ confidence in the state’s long-term growth prospects.

Additionally, the survey indicates that Georgia executives are increasingly focused on innovation and technological advancements. Investments in automation, digital solutions, artificial intelligence, and analytics are expected to rise significantly over the next three years, reflecting a forward-looking approach to maintaining competitive advantage and driving growth.

The ACEC Research Institute’s Q1 2024 Business Sentiment Survey aligns with these findings, reporting high confidence levels across various economic indicators. The survey reveals that net ratings for firm finances (+87), industry conditions (+84), and the U.S. economy (+35) remain high, indicating strong confidence across the board. Future sentiment is equally promising, with expectations of continued improvement in the U.S. economy, industry conditions, and firm finances over the next 12 months.

In Georgia, the engineering sector's outlook is particularly favorable. The state’s focus on infrastructure development, including roads, bridges, transit systems, and airports, aligns with the sectors showing the highest optimism in the ACEC survey. Transportation and infrastructure projects are expected to see significant investment, further enhancing the industry’s growth prospects.

Private Market Insights

Diane Alexander, Director of Private Market Resources at ACEC National, provided a detailed analysis of private market trends in her November 2023 report. According to Alexander, private residential construction spending experienced a 2% year-over-year decline in September 2023, while non-residential private construction grew by a significant 21% during the same period. This growth is largely driven by substantial increases in private manufacturing projects, which saw a 62% year-over-year rise. The report indicates that total construction spending in September 2023 amounted to $1.9 trillion, with $1.6 trillion in private-sector spending.

Alexander’s insights also highlight a notable bifurcation within the office market. High-end, Class A office spaces continue to outperform older, Class B buildings, driven by tenants' preferences for locations with superior amenities and proximity to transportation. This trend is reshaping the commercial real estate landscape, as companies adapt to hybrid working models and prioritize sustainability features.

Infrastructure Investments And Forecasts

Dr. Roger Tutterow’s presentation at the ACEC Georgia 2024 Economic Outlook event further underscores the significant investments in infrastructure within the state. Tutterow detailed the contributions to GDP growth, noting that industrial production, consumer sentiment, and retail sales remain critical drivers of economic performance. His analysis emphasized the impact of federal investments, including the Bipartisan Infrastructure Law, which allocates $65 billion for broadband infrastructure, $304 million for water infrastructure, and $135 million for electric vehicle charging networks in Georgia. These investments are expected to enhance the state's infrastructure capabilities and support long-term economic growth.

Tutterow also highlighted the challenges posed by supply chain imbalances and tight labor markets. The ongoing supply chain disruptions and labor shortages are critical issues that the industry must navigate to sustain growth. Addressing these challenges through strategic investments and workforce development initiatives will be essential for maintaining the sector’s momentum.

Engineering Business Sentiment Report Q1 2024

Recently, the ACEC Research Institute released its Engineering Business Sentiment report findings for the first quarter of 2024. This new data indicates a dramatic increase in optimism among engineering firms towards the U.S. economy compared to the previous year. Wage inflation, however, remains the single biggest 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.”

Joe Bates, senior research consultant with the ACEC Research Institute, added, “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.” Bates explained that an analysis comparing past sentiment survey data to resulting macro-economic data shows that current and future sentiment on the U.S. economy and the engineering industry leads by one to two quarters on macroeconomic trends like employment, housing starts, and inflation.

Key highlights from the survey include:

• Biggest Concerns for 2024: Wage inflation is the single biggest concern among firm executives (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 engineering firm executives, anticipation of the likelihood of a recession in the next six 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 doing so 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. One-fourth (24%) of firms are being forced to turn down good, profitable work due to workforce shortages.

Challenges And Concerns

Despite the optimistic outlook, several challenges persist. Workforce availability remains a critical issue, with 62% of Georgia executives ranking it among the top three business climate concerns. This sentiment is echoed in the ACEC survey, where workforce shortages continue to impact project acceptances, with over half of the firms reporting turning down work due to insufficient staff.

Inflation and rising costs also pose major concerns. While the impact of inflation has somewhat declined from previous quarters, it remains a significant issue, with 62% of firms expressing extreme concern about its effects on their operations (ACEC Research Institute, 2024). Political uncertainty, particularly related to the upcoming presidential election, adds another layer of unpredictability to the business environment.

Technological Advancements And Innovation

Innovation is a key focus area for Georgia’s engineering sector. The Georgia Chamber’s survey indicates a strong intent among executives to invest in automation, digital solutions, artificial intelligence, and analytics over the next three years. These investments are crucial for maintaining competitive advantage and driving future growth.

• Sentiment by Sectors: Future industry sentiment is positive in most sectors, including Transportation, Energy and Utilities, and Water and Wastewater. Current sentiment remains very optimistic within most market sectors. Sentiment is strongest in Roads & Bridges (Net Rating +86), Airports (+82), and Wastewater (+81). Notably, the Net Rating for the Science and Technology sector saw a significant increase year-over-year (+13), while the Commercial Real Estate sector experienced the most significant decline over the past year (-20 points).

• Artificial Intelligence (AI): The report found that 52% of firms have an AI strategy in place or are working on one, and 63% of firms believe that AI will positively impact their firm in the coming year.

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. This quarter’s respondents included 571 executives across the engineering and design services industry.

Similarly, the ACEC survey highlights artificial intelligence's positive impact on the industry. More than half of the firms have an AI strategy in place or are developing one, and 63% anticipate a positive impact from AI implementations in the coming year. This trend underscores the industry's commitment to leveraging technology to enhance efficiency and innovation.

Conclusion

The economic outlook for Georgia’s engineering sector for the remainder of 2024 and early 2025 is largely positive, driven by robust economic indicators, strategic investments, and technological advancements. However, challenges such as workforce shortages, inflation, and political uncertainty necessitate cautious navigation. By addressing these issues and capitalizing on growth opportunities, Georgia’s engineering industry is well-positioned to thrive in the coming year.

The full reports from the Georgia Chamber and the ACEC Research Institute provide further insights and detailed data.

References:

Georgia Chamber. (2024). Executive Insights Survey 2024. Retrieved from gachamber.com/redbook ACEC Research Institute. (2024).

Engineering Business Sentiment 2024 Q1. Retrieved from acecresearchinstitute.org