Last year at this very same time, as we presented our annual construction outlook to our audience, we were cautiously optimistic that the electrical industry was poised for prosperity. The global economy was on a more solid footing, we certainly had a better handle on COVID-19 than in past months/years, and most economists were expecting modest growth. Based on the performance of both our Top 40 Electrical Design Firms and Top 50 Electrical Contractors from 2022, I’d say that projection definitely rang true for the EC&M audience. Companies comprising our 2022 Top 40 Electrical Design Firms (ranked by annual revenue reported from the previous year’s business with the annual survey completed in spring of 2022) logged combined electrical design-specific revenues of $3.167 billion, a 13% increase from the previous year. The Top 50 contractors (survey conducted in late summer of 2022) showed even greater progress — with a 20% gain from the previous year, hitting almost $40 billion as a collective group. According to the Top 50 piece: “That eye-popping gain may be partly due to the timing of revenue bookings for firms and even the inflation spike, but its sheer magnitude — easily the biggest year-over-year jump in at least 15 years — suggests that, despite speed bumps, electrical contractors as a group have been busier than ever the last two years — from the start of the pandemic, through its depths, and beyond.”
Writing EC&M’s annual construction forecast, Jim Lucy, editor-in-chief of sister magazine Electrical Wholesaling, who has 40 years of experience covering the electrical industry, also got it right last year, predicting: “The recently passed Infrastructure Bill is also expected to provide some real financial benefits for the electrical construction industry. All in all, the 2022 construction forecast adds up to what should be a decent year for electrical contractors, facility maintenance workers, and other electrical professionals. There is one caveat, however — that is, if they can navigate the higher material prices, supply chain issues, and worker shortages that continue to cause serious challenges.”
Fast forward to today, and these “serious challenges” only continue to plague electrical professionals, creating a tale of two construction market outlooks if you will. On the one hand, we’re hearing mostly optimistic projections from electrical contractors and design engineers about the current state of the market (thanks in large part to a slew of backlogged projects going into 2023). However, skilled worker shortages, inflation, supply chain issues (equipment delays and material shortages), and rising material prices continue to create uncertainty and instability. Reiterating that sentiment, respondents to our Top 50 survey almost unanimously named the most pressing issue inhibiting their ability to get a job done on time and within budget as “delays with material delivery and logistics.” Citing “delayed projects” as having the greatest short-term impact on their companies in 2021, this year’s results revealed a new nemesis: “supply chain issues”. For a much more detailed analysis on how experts expect the electrical industry to fare in 2023, read the “2023 Construction Outlook.” Although the chances for at least a mild recession seem pretty good, some economists still believe we may narrowly escape a serious downturn.
Without the luxury of a real-life crystal ball when contemplating the industry’s path forward, a reassuring quote from one of my recent podcast guests (in which we discussed how supply chain issues are affecting the electrical industry) kept popping into my head: “Prices do matter. People do adjust, and these things don’t go on forever — they are transitory.” Do not miss this latest edition of EC&M On Air, coming to our website in late December (https://bit.ly/3UO8Z6K), in which I talk with Don Leavens, vice president and chief economist at NEMA; Madeleine Bugel, senior manager of trade and international government relations at NEMA; and Chris Sokoll, president of Disc Corp. These experts provide fascinating perspective and commentary on this very complex issue, offering their thoughts on everything from the underlying factors that are converging to create instability and disruption in the supply chain, how they believe things will play out going forward, and, most importantly, what electrical professionals can do to help alleviate the strain.