ARTBA Forecast: Mixed

After three years of steady nominal growth, the U.S. highway and bridge construction market is expected to flatten in 2009, as recent increases in federal highway investment will likely be offset by weakened state and local highway budgets, according to a forecast issued by the American Road & Transportation Builders Association’s (ARTBA) top economist.

Dr. William Buechner, ARTBA vice president of economics and research, projects the value of construction work put in place on highways and bridges will be $80.2 billion in 2009, a bare 1.5 percent increase over 2008’s $79 billion.

If construction material costs level off next year, as seems likely following the recent collapse of oil prices and the nation’s economic slowdown, the real volume of construction work should stabilize, and may even improve, after declining about six percent in 2008.

One factor that could considerably brighten the forecast, Buechner said, is for Congress and the president to enact an economic stimulus bill in early 2009 that includes transportation investment. Every $1 billion invested in quick-start highway and bridge projects would add about one percentage point to the 2009 forecast.

The federal highway program should provide a cushion for highway construction next year even without a stimulus bill. The $41.2 billion of highway investment enacted by Congress for FY 2008—a 5.5 percent increase over FY 2007—will have its biggest impact during the 2009 construction season as projects started in 2008 ramp up. Another $41.2 billion in the federal highway budget for FY 2009 helps maintain market stability.

“The most critical problem for the highway construction market in 2009 is that state and local governments are facing serious fiscal problems, and some may tap transportation funds or defer transportation investments to meet budgets,” Buechner said. “High gas prices this past summer, combined with a slowing economy, have resulted in a 3.3 percent decline in highway miles driven so far this year—thus reducing state gas tax revenue collections.”

The ARTBA economist noted that depressed new car and truck sales have also reduced vehicle registration fee revenues. Both will impact highway investment. At the same time, foreclosures and a decline in home values in many areas of the country are cutting into the property tax revenues that many local governments apply to their highway construction activities.