Airports, freight rail, and docks, piers and wharves are expected to hold steady in 2012. But spending on airport terminals and runways is forecast to rise 4.5 percent in 2013, freight rail is expected to grow 4.5 percent, and Panama Canal expansion is expected to drive a whopping 23.5 percent increase in spending on U.S. ports and waterways in 2013.
Bridge work has stabilized and is on pace to exceed $29 billion this year, which would be a record. Premo Black says the ARTBA model doesn't predict 2013 growth, but spending on bridges should remain strong.
From September 2011 to October 2012, 21 states and Washington D.C. increased highway-project awards more than 5 percent compared to the previous 12 months (see the map). But highway spending is down 5 percent or more in 20 other states.
Premo Black points out eight states that have been responsible for nearly half of the bridge market for the past four years:
- New York 9.6% -- average $1.7 billion per year
- Pennsylvania 7.3% -- average $1.27 billion
- California 7% -- average $1.1 billion
- Texas 6% -- average $981.5 million
- Florida 5% -- average $841 million
- Illinois 4.6% -- average $735 million
- New Jersey 4.4% -- average $711 million
- Washington 5.4% -- average $411 million (but more than $2.1 billion in awards in the past year)
Public-private partnerships (P3) will add significant funding for design/build work in a handful of states. Premo Black says those most active P3 states currently are Virginia, Texas, Florida, Colorado and Utah.
Total construction growing slow
AGC Chief Economist Ken Simonson expects total construction spending to be up 5 to 9 percent in 2012
"Not great, given that we had a 37 percent drop from peak to trough," he says, "But it's the first increase (in total construction spending) in six years.
"I think that we are going to be on a very gradual upward trend," Simonson says of overall construction spending in 2013.
He expects the multifamily housing boom to continue through 2013 (vacancy rates are at 10-year lows; rents are up), as well as power and energy construction courtesy of shale oil and natural gas development. U.S. shale energy production grew 67 percent from 2007 to 2010, and work continues on production that won't be complete for years.
Simonson credits Panama Canal expansion with driving new port dredging, piers, cranes, land access, warehousing and transportation facilities.
"But I call this a fragile and fragmentary recovery because it definitely has not lifted all construction boats."
Public construction has been tapering off since late 2010, and very recently became the smallest contributor to total construction spending. It is now declining at a 3 percent rate, offsetting some private residential growth.
Simonson expects a slow return to high-single-digit growth through 2017 as the U.S. economy and population continues to grow.
Risks to 2013 outlook
- Sudden jump in taxes (expiration or Bush tax cuts) would chill home and private nonresidential investment
- Federal spending cuts (sequestration) would hit public construction hard
- Deeper slump in Europe, slowdown in China would hurt exporters, ports, possibly banks
- War in Iran, North Africa, Pacific Rim would send oil higher
With 2 percent growth in third-quarter 2012 U.S. gross domestic product coming as a pleasant surprise, nobody should expect a return to halcyon days any time soon. The historical trend in GDP growth is 3 percent, and smart people in the investment world are expecting this economy's new normal to be well below that.
Times are good. You just need to pay very close attention, and place your bids with extra care to feel the growth.