Analysts downplay infrastructure program impact

According to an Associated Press report, an investor note prepared by JP Morgan suggests that financial markets are overly optimistic about the effects the infrastructure spending program proposed by President-elect Barack Obama will have on companies that have links to public-works projects. "Still unanswered is how fast the stimulus program can be put in place and how much of it will be devoted to construction," JP Morgan analysts wrote. They are suggesting that the impact on companies such as construction firms, heavy machinery makers and building suppliers may not be as immediate as many investors expect. "While a large federal infrastructure program would be unambiguously positive for all construction-related stocks, we think investors are underestimating the obstacles to the rapid spending of large amounts of money," the analysts said.

While the report notes that much of infrastructure spending comes at the state level, not through direct federal spending, and initial projects such as improving freight and passenger transportation will not come with the initial economic jolt, the proposed infrastructure program brings with it the potential for a cycle of confidence that should positively impact construction and materials companies incrementally throughout the new year.

Obama said earlier this month that he wants to create a public works program that will rival the building of the federal highway system in the 1950s, spending that would focus on projects such as repairing roads and schools. The measure would be intended to provide jobs and new resources for businesses at a time when unemployment is rising and companies are making cutbacks. Your comment?