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.
Bridge and tunnel awards are up in 24 states and down in 25 states and Washington, D.C., with one state within a plus or minus five percent range. Nationwide, the real value is down 2.5 percent for the 12 months through May 2013.
“The slowdown in contract awards indicates we probably aren’t going to see a significant uptick in the pace of highway and bridge activity as the construction season enters full swing. But as always, the outlook does vary from state to state,” says Black. “Some states, including California, Georgia, Mississippi, New York, Virginia, Oregon and New Hampshire have significantly increased the value of their highway and bridge contract awards in the last year, which indicates more work ahead in these states in the next 12 months.”
A wave of waterway construction
The outlook is very positive for dock, piers and waterways. The value of recent state and local government contract awards is up nearly 36 percent, indicating a growing market. The increase is driven in part by large investments in Washington and California. Other states that have significantly increased the level of their awards include Georgia, Maine, Massachusetts, New Jersey and New York. Many ports are gearing up for the expansion of the Panama Canal in 2015.
Steady market for airports
State and local government contract awards for airport runways are down nearly 12 percent, indicating lower overall levels of investment. However, awards are up in 24 states, including Florida, Georgia, Maryland, Mississippi, South Carolina and Tennessee.
“Despite the downturn in contract awards, the outlook for this airport runway and terminal work is still positive,” Black says. “As the economy recovers and more people are flying, investments will increase. We have seen a continued recovery in the number of airline passengers in the beginning of 2013, a good sign for the overall market.”
Transit & rail strong
Although the real value of work on transit and railroads is off to a strong start in 2013, state and local contract awards between June 2012 and May 2013 have slowed nearly nine percent, compared to the previous 12-month totals. This is despite significant increases in award levels in California and Colorado. Additional states with growing programs include Arizona, Washington D.C., Illinois, Minnesota, North Carolina, Ohio, Pennsylvania and Washington.
“We tend to see some volatility with state and local government rail and transit contract awards,” says Black. “This reflects some individual projects that can affect national totals. Investment in this sector will continue to increase as the U.S. economy shows signs of more recovery.”
To purchase the data analyzed, which includes detailed information on major market segments, contact ARTBA’s Lital Shair at 202-289-4434, or firstname.lastname@example.org
Editor’s Note: Data accounts for changes in project costs, including material prices and overall inflation. Figures do not include contracts for planning and design work, environmental analysis, or project management associated with transportation capital improvement projects.