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ARTBA forecasts growth ... but cautions higher costs could absorb gain

Spurred by continued increases in federal funding and renewed economic growth, the U.S. highway construction market should grow 4.5 percent in 2005, 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 should be $69 billion in FY 2005, up from $66 billion in FY 2004, 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, released his report Nov. 10 at a seminar in New York City for Wall Street analysts. He says several factors should help support market growth next year:

State and local budgets are improving. General state tax revenues are rebounding. Economic growth is the best indicator of state and local funding for highway and bridge construction, Buechner says. The Bush Administration's August budget update predicts the economy will grow about 5.5 percent annually in current dollars between now and 2009. That should provide a solid base for more state and local government investment in highway construction in 2005 and beyond.

State and local DOTs will have more federal highway aid available in FY 2005 than FY 2004. Congress has signaled its intention to appropriate $34.6 billion for federal highway investment in FY 2005. On September 30, Congress also voted to shift $1.9 billion of FY 2004 highway funding into FY 2005. The result was to reduce FY 2004 funding of $33.6 billion to $31.7 billion and increase FY 2005 to $36.5 billion. The effective year-to-year increase would thus be $4.8 billion, ARTBA says.