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ARTBA Economist forecasts 5.4% growth in highway construction market; higher construction costs could absorb much of the gain

Spurred by a combination of renewed economic growth, emergency repair work following Hurricane Katrina and a new law that increases federal investment in highways, the U.S. highway construction market should grow 5.4 percent in 2006, according to the chief economist for the American Road & Transportation Builders Association (ARTBA). The real question, however, ARTBA Vice President of Economics & Research William Buechner says, is how much of the growth will be absorbed by rising construction costs.

The value of construction work performed on highway and bridge projects is projected to be a record $70.3 billion in FY 2006, up from $66.9 billion in FY 2005, according to ARTBA.

Dr. Buechner, a Harvard-trained economist who served the Joint Economic Committee of the U.S. Congress for nearly two decades before joining ARTBA, says several factors should help support market growth next year:

Strong economic growth has boosted general state tax revenues and there is much less pressure to dip into highway funds to balance state government budgets. Continued economic growth should provide a solid base for more state and local government investment in highway construction in 2006 and beyond.

Signed into law last August, the Safe, Accountable, Flexible, Efficient Transportation Equity Act — A Legacy for Users (SAFETEA-LU) guarantees a record $286.5 billion transportation investment level from FY 2004-09 and provides predictability in federal funding for highway construction, according to Buechner. SAFETEA-LU’s innovative financing provisions, such as allowing $15 billion in private activity bonds for highway improvements, should also help support future market growth, ARTBA says.