Heavy construction spending is 7% above the credit crisis low last January but unchanged from the peak level reached last fall. With all of the key market drivers now negative, a 5-6% drop is expected over the rest of the year, followed by very sluggish expansion early next year — largely from the stimulus plan — and then return to the 10% growth trend in the second half of next year.

The expected pickup late next year will result from more site development when building construction is again growing and a resumption of expansion in private facilities in a stronger economy.

The federal Highway Trust Fund will run out of cash this summer forcing delays in road projects until Congress makes either a temporary or permanent fix to the bankrupt fund. Contractors prefer a higher fuel tax or a permanent guaranteed slice of general fund revenues but will probably have to settle for a temporary cash infusion, as happened last year, from a Congress busy rearranging the rest of the economy. The usual boost in federal funding in the first year of the six year funding cycle will be delayed.

Key Indicators of the U.S. Market Environment — July 2009
Heavy/Engineering Construction
(Driven by demographics and government finances, as well as cyclical factors)

	Year Ago	Previous Month or Qtr.	Latest		Level	Recent Trend	Impact on Const.
Heavy/Engineering
Federal highway trust fund, $ billions (U.S. Treasury Dept.)	9.979	9.102	Jun	8.695	Low	Falling
Electric power capacity utilization rate, % level (FRB)	84	79	Jun	80	Low	Falling
Airline revenue passenger miles, billions (RCD) (ann. % change)	-11.6	-8.8	Jun	-0.8	Low	Falling
State & local govt. capital spending, $ billions (U.S. Commerce Dept.)	345	361	Q1	349	Average	Falling
State and local government tax receipts, $ billions (U.S. Commerce Dept.)	1317	1284	Q1	1260	Low	Falling
Heavy contractor employment, 000s (U.S. Labor Dept.)	972	877	May	862	Average	Falling
Construction equipment shipments, % change y/y (U.S. Census Bureau)	6.8	-36.1	May	-35.8	Low	Falling

Abbreviations: y/y = year over year; WE = week ending;
FRB = Federal Reserve Board; RCD = Reed Construction Data.
Table: Reed Construction Data and Reed Construction Data - CanaData.