Engineering firms move to a position of strength, ACEC Research Institute reports

Despite the macro headwinds, firm-level fundamentals tell a resilient story.

The ACEC Research Institute released its Engineering Business Sentiment Survey Q2 today, painting a picture of an industry that remains fundamentally sound, while recalibrating in response to a more uncertain economic environment. 

The quarterly survey of 583 engineering firm executives found firm finances and industry performance still strong — net ratings of +79 and +74, respectively — yet confidence in the broader U.S. economy dropped 26 points quarter over quarter to +19. The 12-month economic outlook has turned negative at -6.  

Political uncertainty (cited by 90% of respondents), inflation and rising costs (84%), geopolitical tensions (81%) and recession concerns (69%) are the primary drivers of that caution. Firms place the probability of a recession in the next six months at 46%. 

Despite the macro headwinds, firm-level fundamentals tell a resilient story. Nearly half of respondents (49%) report backlogs of one year or more, with the median holding steady at 11 months showing there is plenty of work to be done. Sixty-four percent expect hiring to increase over the next 12 months. Workforce pressures are also easing — only 33% of firms turned down work due to staffing shortages in the past six months, down from 51% in Q4 2024. This position of strength gives firms more capacity to pursue the right work rather than any work. Among those still turning down projects, 83% say they are being more selective about what they accept. 

Current sector performance remains broadly positive led by data centers (+87) and energy and utilities (+80). Federal, military, state and local government buildings posted the largest year-over-year gain in future sentiment, up 53 points — a striking recovery from the uncertainty that gripped the sector following the tariff announcements of Q2 2025. Tariff concern itself has faded considerably, with its net rating falling from +49 at its peak to just +9 this quarter. 

“The sector is shifting from a growth posture driven by demand and labor constraints to one defined by cautious expansion, cost management and strategic selectivity," said ACEC board chair Steve Lefton. “Firms are healthy and they're planning to grow with greater discipline and a closer eye on the horizon.” 

One emerging pressure point is healthcare costs. Seventy-eight percent of firms saw insurance premium increases at their last renewal, with an average increase of 14% and 92% of respondents expressed at least some concern. The burden falls hardest on smaller firms, though most (68%) firms report no change to hiring plans as a result. 

“The story this quarter is recalibration,” said Joe Bates, senior research consultant for the ACEC Research Institute. “Firms are prioritizing higher-value projects, managing costs more deliberately and planning for growth at a more measured pace. That's the hallmark of an industry that knows how to navigate uncertainty.” 

The bottom line 

The Q2 2026 results reflect an industry adapting in real time to a more complex operating environment. Firms are healthy, and they are also more selective, more cost-conscious and more attuned to macro risks than at any point in the past year. 

About the ACEC Research Institute

The ACEC Research Institute is the independent research arm of the American Council of Engineering Companies (ACEC). Its mission is to fund and deliver research to equip the engineering industry with actionable intelligence on the issues critical to its success. Learn more at www.acecresearchinstitute.org.