Bright spots in the growth of airport, rail, transit, port and waterway construction have been overshadowed by a six percent decline in the real value of highway pavement work, according to the latest American Road & Transportation Builders Association (ARTBA) analysis of U.S. Census Bureau data. Contractors completed $8.4 billion in pavement construction work between January and April 2013, compared to $8.9 billion during the same time period in 2012.
The airport, rail, transit, and port and waterway construction markets have each shown double digit real growth in early 2013. The real value of subway and light rail work is up 22.6 percent to $2.4 billion, railroad work is up 11 percent to $2.9 billion, airport terminal and runway construction is up 22 percent to $3.7 billion, and work on docks, piers and ports is up 23 percent to $761 million. Bridge and tunnel work between January and April 2013 was slightly above last year’s pace, with $7.3 billion in work completed, compared to $7.2 billion during the same time period in 2012.
There are several things affecting the pavement market, according to ARTBA’s Chief Economist Dr. Alison Premo Black. Winter weather is always one factor impacting the market in the early part of the year, but it does not explain it all. She notes there has been a continued decline in pavement work since 2009.
"This is largely a result of the pull back in state and local spending, the significant drop-off in federal investment in transportation improvements due to the completion of the 2009 stimulus law, and status-quo federal investment levels under MAP-21," explains Black. "When you combine all of these factors, pavement work is off to the slowest start that we have seen in at least 14 years."
Current challenges in the highway and bridge market underscore the need for increased and sustainable transportation revenue sources at the federal and state levels, according to Black.
"Although some states have recently taken steps to increase their highway and bridge investment, there is still a huge gap between our current investment levels and the identified needs for the nation’s infrastructure network,” Black says.
With the reauthorization of MAP-21 due in 15 months, the central issue, Black says, will be solving the revenue crisis facing the Highway Trust Fund. Absent congressional action by late next year, federal highway investment would be cut from $40.3 billion to $3 billion in 2015, and transit investment would be virtually eliminated. Such action would jeopardize hundreds of thousands of U.S. jobs, undermine U.S. competitiveness, and devastate the transportation construction market for years.
Market outlook mixed
The outlook for the transportation construction industry going forward is also mixed, according to ARTBA’s analysis of state and local government contract award data from McGraw-Hill Dodge. Contract awards are a leading indicator of market activity at the state level, and as such, provide a glimpse about the trajectory of different sectors of the transportation construction market.
State highway & bridge activity uneven
The real value of 12-month rolling state and local government contract awards from June 2012 to May 2013 for highway work is up in 25 states, down in 18 states and Washington, D.C., and within a plus or minus five percent range in seven states. Overall, the real value of awards nationally is down 1.6 percent.