December 18, 2018

ARTBA-SQUARE.pngARTBA MARKET FORECAST EXPECTS POSITIVE GROWTH IN 2019

On December 5, ARTBA Chief Economist Dr. Alison Premo Black provided affiliates with a comprehensive market forecast on US Transportation Construction. Although many different segments of the construction industry were discussed and broken down in great detail, LICA listened intently to the forecast for public highways, streets and related construction work, as this is a core focus of many of our member firms. The news was very positive in this sector. Based on historical data and current trends, ARTBA said they expect to see some real growth in this area in the coming year and they are forecasting a nearly 5% increase (up to approx. $66.5 billion). They credit some of this growth to state governments being in a “much better shape” now, than this time last year. They also see increased revenue sources (through new gas taxes and other measures) as being responsible for more projects being let. In the bridge and tunnel construction segment, they also forecast growth, but in the more typical 1-2% range.

Dr. Black also presented data which showed that typical project costs were up about 3.8% over the prior year (based on ARTBA’s weighted price index calculations) and estimate costs to continue to increase by approx. 2.7% over the next few years. The biggest contributing factor for this increase is the rise in energy costs, noting that diesel prices have risen dramatically (up 109%). There was also talk about the impact of Trump’s tariffs on steel, however Dr. Black noted that it is nearly impossible to decipher the actual percentage of increase attributed specifically to the tariffs as there are so many variables. She did say that product costs for highway and street projects has risen as well, up over 10%.

Dr. Black noted that the rail market is a bit soft, but said freight rail value is expected to increase. Ports and waterway work was surprisingly strong in 2018 and may continue. She noted that the Army Corps of Engineers has been spending much more, supporting this growth, and there are many large projects they are involved with.

Dean Franks, ARTBA’s Sr. VP of Congressional Relations also gave an overview of current federal legislative issues, noting that finding a fix for the Highway Trust Fund (HTF) is of paramount importance. With the democrats winning the house (234-200 with 1 race pending), they hope there will be some progress. To highlight the issue, he noted that the US has outspent the HTF for the last several years. From 2016-2018 actual HTF revenue was $41 billion, but our spending has grown closer to $52-54 billion. Obviously, this trend cannot continue. They are continuing to work with federal officials to try and find a permanent solution.

Some other interesting facts of note:

  • P3’s account for approx. 3-5% of overall construction in the US
  • On average, about 10 cents of every dollar spent in heavy construction goes to steel-related projects
  • New York bridges accounted for 10% of the whole bridge market in 2018

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