ARTBA Forecasts Highway/Bridge Market to Decline 6% Next Year

AASHTO Journal, 16 December 2011

The highway and bridge construction market is expected to contract 6% in 2012 to $72.6 billion from an estimated $77 billion this year, according to the annual transportation construction forecast issued Monday by the American Road & Transportation Builders Association. The subway and light-rail markets are projected to be down even more (16%).Overall, the outlook for the 2012 transportation construction market is mixed, ARTBA Senior Economist Alison Premo Black said during a 90-minute webinar for Wall Street analysts and construction industry executives.

“The main factors driving the decline in highway and bridge construction are not surprising: the winding down of infrastructure investment under the American Recovery and Reinvestment Act, continued weak growth in the U.S. economy, persistent state and local budget challenges, and a static federal-aid highway program,” Black said in a statement.

She cautioned that the long-delayed surface transportation reauthorization bill remains a “wild card.” If Congress passes a multiyear bill in early 2012 that, at minimum, maintains current investment levels, it could help interject greater certainty in the market. Both the Senate and House proposals contain language to expand the Transportation Infrastructure Finance and Innovation Act loan program, which could offer another market boost if leveraged quickly, Black said.

ARTBA predicts that the railroad market, driven largely by private-sector investment, will increase nearly 4% next year and the value of construction for ports and waterways is expected to grow 6%, driven by work on both coasts in preparation for the 2014 expansion of the Panama Canal.

Black noted the transportation sector remains the most stable in a beleaguered construction industry. Between 2007 and 2011, the real value of highway and bridge construction (adjusted with the ARTBA Price Index for material prices, wages, and inflation) fell 10%. During the same period, the real value of total construction work in the United States fell by one-third and the real value of residential construction dropped more than 50%.

Despite the national downturn in market activity, some states are poised for growth, Black said. There are 18 states where the value of state and local government highway and bridge contract awards for Fiscal Year 2011 was higher compared to FY 2010.

AEM Releases Annual Construction Equipment Business Outlook

Also this week, the Association of Equipment Manufacturers released its forecast for the next three years. Construction equipment manufacturers anticipate overall business to close out 2011 with double-digit increases over last year. Growth is expected to continue but at a slower pace for 2012-14, according to AEM’s annual business climate survey.

U.S. construction machinery business is predicted to grow 10.8% in 2012, 9.9% in 2013, and 8.1% in 2014.

The state of the general economy, including consumer confidence and credit availability, plus steel prices and the protracted slump in single-family housing starts, are significant negative factors influencing future sales, according to AEM survey respondents. A key positive factor cited was the continued strength in export demand. The lack of substantial action on highway funding was cited as a negative factor, with respondents more hopeful for positive results in 2012.

“Action on federal highway funding will bring some stability to an important industry segment,” AEM President Dennis Slater said in a statement. “A well-maintained and adequate transportation system is critical not just for our sector but for business and our nation overall; it is essential for the safe and efficient movement of people and goods and to keep the U.S. competitive in the global marketplace.”

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