Construction Industry Forecasts

The Senate plan is a two year $109 Billion program which is approximately the equivalent of a $350 billion six year program. President Obama’s budget request was for a six year $556 billion program. The Obama plan is out of touch with current financial realities and will not be part of the compromise negotiations.

Reed Construction Data expects highway construction spending to drop 5-6% in 2011 which is about back to the 2007 level. 2012 spending is forecast to expand 8-9%. The 2011 dip reflects the ebbing of highway stimulus funds and the weakening of state and local government finances. The 2012 rebound will be the result of a modest improvement in state and municipal finances, more use of private funding and changes in the federal highway program that close many of drain holes that siphoned federal highway funds off for other uses.

If the House and Senate split their funding difference, the result will again be a $285 Billion six year plan. We expect the compromise to include many of the reform elements in the Senate and especially the House proposals. So the new $285 Billion plan will build more roads, bridges, drainage and crash barriers. The new plan will have no earmarks, eliminates more than 70 special programs such as promoting bike paths, streamlines approval and review processes and makes the use of private funds easier. The earmarks were generally for roads that would not otherwise have been built or repaired. The special programs were generally added at the request of individual members of Congress for non paving or bridge work or public works projects that are typically financed in municipal budgets.

If this forecast is accurate, 2012 highway spending will be 5% higher than 2009 spending which is too little to cover higher labor and materials costs over three years. The inflation adjusted level of highway spending will have been stalled for five years from 2008 to 2012.