Softness in housing subdivision market, slowing of proposal pipeline points to slower growth in upcoming quarters for design firms
FOR IMMEDIATE RELEASE / PRURGENT
November 5, 2019 (Newton, Mass.) — Despite 2019 bringing architecture and engineering (A/E) firms some of the most robust market demand in years, they may not be so lucky in 2020. PSMJ’s latest Quarterly Market Forecast (QMF) report shows some of the slowest proposal activity in more than 10 years in key client markets.
Since 2003, PSMJ Resources, Inc., the worldwide leader on improving the business performance of architecture and engineering organizations, has asked A/E firm leaders about their outlook and proposal activity in 12 major client markets and 58 submarkets on a quarterly basis. The data is reported in a Net Plus/Minus Index (NPMI). An NPMI value of 0% indicates an equal number of respondents are reporting growth and decline.
When asked about projected proposal opportunities for the last quarter of 2019 being higher or lower than the previous quarter, an NPMI value of 19% continues a declining trend (while still in positive territory) to a level not seen since 2009.
“The most leading indicator of the overall health of the A/E/C market is PSMJ’s Proposal Net Plus/Minus Index (NPMI) which remains positive but at a lower level than in previous quarters,” says PSMJ Principal David Burstein, P.E., AECPM. “Another key indicator is the housing subdivision market, which influences about 80% of A/E/C business activity. The Housing Subdivision NPMI also remains positive, although the trend has not been favorable. This slowdown is part of the global slowdown caused primarily by the various trade wars currently underway, especially the one between the U.S. and China.”
Burstein looks at A/E markets and submarkets, such as housing and subdivisions, as leading indicators of if, and when, the next recession will hit.
With an NPMI value dipping to its lowest level since clawing out of the recession in 2013, this is one potential indicator that trouble is looming for A/E firms. Burstein adds, “These results probably indicate slower revenue growth in the coming quarters. However, the fundamentals of the U.S. and Canadian economies remain strong and I believe President Trump will finalize trade deals with China and others by early 2020. Also, the effects of lower interest rates (especially lower mortgage rates) should begin to boost the housing market. I don’t see the current slowdown leading to a recession – at least not before the next presidential election.”
To learn more about PSMJ’s QMF or to participate in the next survey, visit www.psmj.com/qmf. PSMJ members get complimentary access the complete report each quarter.
For more than 40 years, the mission of PSMJ Resources, Inc. has been to improve the business performance of A/E/C organizations worldwide. PSMJ offers published information, educational programs, in-house training, and management consulting services in Strategy, Business Development, Project Delivery, Human Resources, Financial Management, Mergers & Acquisitions, Transition Planning, and more to A/E/C professional services firms.
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