Demand  for large law firm services fell 1.4% in the fourth quarter – the third consecutive quarterly decline and the biggest drop since Q1 2013.  For the full year, demand fell 0.6% – the first annual decline in demand since 2013.  Those are among the key findings from the Thomson Reuters Peer Monitor Economic Index (PMI) report for the fourth quarter.

In better news, rates recovered slightly in 2016, even though rate growth pulled back slightly from a two-year high (3.1%) in the third quarter to 2.9% in the fourth quarter. For the year, rates were also up 2.9%, which was a noticeable improvement from the 2.7% rate growth recorded in 2015.  However, as pointed out in the recent 2017 Report on the State of the Legal Market, produced by Peer Monitor and Georgetown Law, factors such as the widespread use of budget caps and continued low realization rates may be blunting the benefits of improved rate growth.

Expense growth slowed considerably in the fourth quarter, helping offset the weaker demand.

Among the practice areas, transactional work was mixed. Corporate work rose for a twelfth consecutive quarter, bolstered by strong M&A work, while real estate and tax work both fell in the fourth quarter. Litigation was down 2.7% its weakest quarterly performance since Q1 2013. Patent litigation fell

A copy of the Q4 2016 PMI report can be downloaded here: http://legalexecutiveinstitute.com/wp-content/uploads/2017/02/PMI-4Q-2016.pdf