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    Robust construction

    Jan. 1, 2007
    THE 2006 transportation construction market was the most robust in more than 20 years with the value of work on highways, bridges, airports, and transit systems up 15% over the last year

    THE 2006 transportation construction market was the most robust in more than 20 years with the value of work on highways, bridges, airports, and transit systems up 15% over the last year, according to the American Road and Transportation Builders Association (ARTBA).

    Fueled by increased federal, state, and local highway investments, a $2.3 billion congressional appropriation for repair work on highways damaged by Hurricane Katrina and greater investments in freight rail, the total value of construction performed on transportation projects was expected to hit a record $106 billion in 2006, up from $92 billion in 2005, said William Buechner, ARTBA vice-president of economics and research.

    Highway and bridge construction provided much of the driving force for the 2006 growth. The value of construction work on highways and bridges grew almost $11 billion (16%) to $76.3 billion, the largest increase since 1984 when Congress was funding extra highway construction to help end a severe recession.

    Some of the increased spending reflected higher construction costs, particularly for asphalt, cement, and aggregates. But, even after accounting for higher costs, the real increase in highway and bridge construction was a robust 8% or more, Buechner said.

    Unlike 2005 and 2006, when rising construction costs ate up part of the dollar increase in highway construction spending, the purchasing power of construction budgets in 2007 may get an unexpected boost from declining construction material costs. The 2005-06 inflation in highway construction costs appears to be slowing and may be ending.

    Falling petroleum prices are bringing down asphalt costs while the growth of worldwide cement capacity may help stabilize the cost of ready-mix concrete. The Producer Price Index for highway construction materials fell in August and September. If costs stay down, construction dollars in 2007 would buy more construction than in 2006, ARTBA said.

    Buechner forecasts modest growth in the range of one to two percent for highway and bridge construction market in 2007. His forecast for other transportation modes:

    • Airports: After the September 11, 2001, terrorist attacks, airport construction fell due to less air travel and the diversion of federal airport construction funds to enhance airport security. These trends have now been reversed. As a result, the value of construction work on airport runways and related projects grew 18% in 2005 to $5.8 billion and were projected to grow to about $6 billion in 2006. For 2007, increased federal funding for airport construction plus increased revenues from Passenger Facility Charges and excise user fees should push airport construction to more than $6 billion.

    • Subway and light rail: The value of construction work performed on subway and light rail projects has hovered around $3.5 billion for the last five years. A number of major projects are in line for federal financing in FY 2007, but the impact on construction probably won't occur until 2008 and later. ARTBA expects no breakout from the $3.5 billion construction level in 2007.

    • Freight rail: The value of construction work performed on freight rail was on track to total $7.9 billion in 2006, up more than 20% from $6.6 billion in 2005. Rail construction is largely privately financed and is driven by the volume of freight traffic. As long as the economy keeps growing, this market should also grow.