By Dr. Alison Premo Black
The U.S. transportation infrastructure market is expecting 4.2 percent real growth in 2019, after adjusting for project costs and inflation, according to ARTBA’s annual forecast. Increased transportation investment from all levels of government—federal, state and local—will help drive this growth across all modes.
Market activity is expected to reach $278.1 billion in 2019, up from 2018’s $266.9 billion.
The transportation construction market also grew by 4.2 percent in 2018, driven largely by gains in airport terminal and runway construction, which increased by $5.8 billion, or 33 percent.
Spending on public highway and street construction rose by $2.7 billion—5 percent—in 2018, recovering some of the market decline in this sector from 2017.
Port and waterway construction and private highway and bridge construction associated with residential and commercial developments also grew in 2018. Infrastructure construction by Class I railroads and public bridge and tunnel construction were down 4 percent and 2 percent in 2018, respectively.
Federal transportation investment received a boost from the FY 2018 appropriations bill—Congress provided an additional $5 billion that will be available over the next four years. The $2.5 billion for highway programs is in addition to an increase of $930 million approved as part of the core highway program under the 2015 FAST Act law.
One wild card in the forecast is the outlook for the reauthorization of the FAST Act and the ability of Congress to find additional revenues to support the Highway Trust Fund. If states start delaying projects in response to uncertainty over the future of the federal-aid highway program, then it would temper 2019 market growth.
Overall, highway construction market activity is expected to increase in about half of the states and Washington, D.C. in 2019. Some of the largest markets include California, Colorado, Florida, Illinois, Maryland, Michigan, New York, Ohio, Pennsylvania, Texas and Virginia.
Other market risks include uncertainty over material prices, increased labor costs and potential labor shortages in some regional markets.
ARTBA estimates project costs, which remained below general inflation between 2013 and 2016, rose 2.7 percent in 2017 and 3.8 percent in 2018, largely due to increased costs for diesel fuel and materials.
Price data shows that average annual prices in 2018 for steel products were up between 6 and 14 percent, depending on the type of product, compared to 2017.
It is difficult to isolate the impact of tariffs on the price of steel-related products from other market forces, such as the cost of energy, transportation or input materials. But the uncertainty created by the steel and aluminum tariffs enacted in March 2018 will continue to have an impact on the highway construction market as contractors include that dynamic in their bids and cost structure. Industry wages for employees on job sites were up 3 percent in 2018. The forecast assumes that project costs in 2019 and beyond will increase at the historical rate of 2.7 percent as energy prices stabilize.
Among the forecast highlights:
Public & Private Highway, Street & Related Construction
ARTBA estimates that work on private highways, bridges, parking lots and driveways will increase from $65.9 billion in 2018 to $69.1 billion in 2019, and will continue to grow over the next five years as market activity increases in those sectors. This data is captured by the U.S. Census Bureau as part of residential and commercial construction investment.
The real value of public highway, street and related work by state DOTs and local governments—the largest market sector—is expected to increase by 5 percent to $66.5 billion after growing 4.5 percent in 2018.
Strong growth in large states are expected to drive national gains. California, Florida, Illinois, Pennsylvania, Texas and Virginia have shown significant increases in contract awards over the last year, a leading indicator of highway construction activity in those states.
The impacts of the $2.5 billion increase in federal transportation investment through the FY 2018 appropriations process will vary, depending on the timing of state obligations and the awarding of projects through several U.S. Department of Transportation (DOT) discretionary programs. But overall, this boost will contribute to growth in 2019. The increase in state and local revenues through user fee increases, bond programs, ballot initiatives and other funding mechanisms also will support additional activity next year.
Bridges & Tunnels
The pace of bridge & tunnel work slowed in 2018 but is expected to resume growth of 1.5 percent in 2019. Bridge and tunnel activity fell slightly from $31.9 billion in 2017 to $31.2 billion in 2018, after adjusting for project costs and inflation. It is expected to grow to $31.7 billion in 2019, with the pace increasing to over 2 percent annually in 2020 and beyond. Light Rail, Subways, & Railroads Public transit and rail construction is expected to grow from $19 billion in 2018 to $20 billion in 2019, a 5.7 percent increase.
Airport Runways & Terminals
The value of airport construction, including terminals, runways and related work, is expected to increase 4.4 percent from $23.2 billion to $24.3 billion. After growing 38 percent in 2018, airport terminal and related work, including structures like parking garages, hangars, air freight terminals and traffic towers, is expected to increase from $18.4 billion in 2018 to $19.2 billion, an increase of 4.5 percent. Runway work, which was up 18 percent in 2018, is forecasted to increase from $4.9 billion in 2018 to $5.1 billion in 2019.
There are currently 11 major airport expansion projects over $1 billion that are underway or about to begin in California, Colorado, Florida, Georgia, Illinois, New York, Tennessee, Texas, Utah, and Virginia.
Ports & Waterways
The value of port and waterway investment is expected to grow 3 percent to $2.6 billion in 2019. Construction activity in 2018 was $2.5 billion, up from $2.2 billion in 2017.
The ARTBA forecast is based on a series of proprietary econometric models for each mode and analysis of federal, state and local data and market intelligence.
Dr. Alison Premo Black is ARTBA’s chief economist.
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