Construction News Tracker is presented by Caterpillar and produced by ForConstructionPros.com.
Before the COVID virus struck the nation, the Congressional Budget Office projected the Highway Trust Fund (HTF) would be insolvent in mid 2021. Now, with a massive loss of revenue of 79% brought on by reduced traffic volumes, it appears the HTF will be out of money far quicker than expected. Lawmakers are aware of the problem, and in one case democrats in the House have passed a $1 trillion infrastructure bill, but it appears there's no political will to advance the legislation.
Both of the presidential campaigns are said to be poised to address the infrastructure situation. Meanwhile the Trump Administration moved to lessen the environmental impact on infrastructure projects by updating the National Environmental Policy Act. That move significantly reduced the footprint on construction projects of environmental law. AGC said the move helps to reduce costly delays for contractors — a positive action in light of the pandemic.
Economic indicators show mixed results for construction
For the 17th consecutive week the nation has lost a significant number of jobs to as a result of the virus crisis. This time the number is 1.3 million in unemployed laid off workers showing it continues to cut employment rolls. Claims in Florida doubled to 129,000 from the previous week, and in Georgia they rose by a third to 136,000.
The total number of people receiving jobless benefits is at 17.3 million.
A drop of 6.6% in June to the Dodge Momentum Index has lowered the monthly measure to 121.5 from a revised May reading of 130.1. The Dodge Index is a widely watched report for nonresidential building projects in planning that lead construction spending for a full year. A noticeable lower shift in the Index continues as fallout from the virus recession continues to hold its grip on construction.
The remaining components of the Index, institutional building fell 11.7% while the commercial sector dropped by only 3.5%. The overall Dodge Momentum Index fell 13% in the second quarter of the year. Economists predict that return from one of the steepest downturns in U.S. history will be slow and fraught with risk.
AGC reports that construction added 158,000 jobs in June as the marketplace began to expand, but that figure also reflects the fact that infrastructure building continues to lag behind the expansion of jobs in the home building sector. AGC Chief Economist Ken Simonson says that looming budget deficits affecting local governments is causing them to postpone of cancel road and other projects as evidenced by the Bureau of Labor Statistics numbers cautioning that those job losses will expand unless the federal government replenishes state and local coffers stemming from the virus outbreak.
Simonson says the category that includes highway and infrastructure workers collapsed by 10,000 jobs at the height of the pandemic. As far as contractors are concerned, AGC says one in three report project cancellations as of June. A separate survey by the National League of Cities of 1,100 municipalities finds that 74% have made budget cuts due to the projected loss of $360 billion in revenue over the next three years as a result of the virus situation.
Lets talk about the hottest commodity in America these days — it's wood. Forest product prices are soaring as a result of the virus crisis, particularly lumber and plywood due to home builders making up for lost time and a race by restaurant and bar owners to install outdoor seating areas. Lumber futures has risen more than 85% since April and recently settled in for July delivery at $499 per thousand board feet.
The futures rarely trade above $450, but the rally is geared at the hottest home building market since 2006 as people stayed home and built decks, fences and all kinds of things with wood.
Pipeline projects put on hold
A pair of large pipeline projects are no longer operational. The $8 billion Atlantic Coast Pipeline, a 600-mile-long natural gas effort across West Virginia and Virginia into North Carolina, has been scuttled by its developers citing rising uncertainties over costs, permitting and litigation. Meanwhile a federal district court judge ruled the much maligned Dakota Access Pipeline must stop its oil flow across the northern midwest pending further environmental review.
California high speed rail expanding
The San Bernardino County Transportation Authority has given Virgin Trains authority to expand its high speed rail plan in southern California. Originally the rail line had been given $3.2 billion in bonds to build a line from Victorville CA, to Las Vegas. Now this decision expands the high speed service along the median of Interstate 15 to Rancho Cucamonga where it would connect to a proposed transit hub that would include an underground people mover into Ontario International Airport. Virgin Rail in California is also called Desert Express. The existing transit hub already connects light rail service to Los Angeles.
In closing, an obstacle is something you see when you take your eyes off the goal.
This is Construction News Tracker looking over the industry that makes the world a better place, presented by Caterpillar and produced by ForConstructionPros.com.
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