The U.S. transportation infrastructure market is expected to grow 5 percent in 2020, according to the American Road & Transportation Builders Association (ARTBA) forecast model. Increased transportation investment from all levels of government – federal, state and local – will help drive this growth across all modes.
Market activity is expected to reach $300.4 billion in 2020, up from 2019’s $286.5 billion, after adjusting for project costs and inflation. This includes:
- Public and private investment for highways, bridges, public transit, rail, ports and waterways, and airport runways and terminals;
- Private investment for roads, streets, driveways and parking lots in residential and commercial developments;
- And support work by state departments of transportation (DOTs) and local governments for highway and bridge planning and design work, routine maintenance, and right of way purchases.
The transportation construction market increased 8 percent in 2019, driven largely by gains in highway, street and pavement work, which grew by $9.6 billion to $73.1 billion.
Airport construction work on runways and terminals increased by less than 1 percent in 2019 but was still at record investment levels. Strong growth in public transit work as well as private railroad investment helped support a robust year for transportation construction activity.
An increase in federal transportation investment through the annual appropriations process will help support increased construction market activity. Congress is once again expected to provide additional money for highway, bridge, transit and airport construction through traditional programs, as well as BUILD America discretionary grants that can be used for a variety of transportation infrastructure projects. Between FY 2018 and FY 2020, Congress will have provided between $15 billion and $16 billion in additional transportation funding, above programmed levels in the 2015 FAST Act law and the Airport Improvement Program (AIP).
This federal investment, combined with recent increases in state and local government transportation funding, are behind the significant market gains in 2019 and will help support real increases in 2020, as projects continue to get underway.
Four states raised their state motor fuel tax in 2019, bringing the total number of states to 31 that have increased or adjusted their rates to support transportation investment. Three states approved other recurring funding measures, five provided a boost through general funds or a new bond issue and eight states approved increased alternative fuel or electric vehicle fees.
There were 305 state or local transportation funding measures on the ballot in November 2019. Nearly 90 percent of those measures were approved, generating an additional $9.6 billion in potential revenue that will be spent on projects over the next few years.
One wild card in the forecast is the outlook for the reauthorization of the FAST Act and the ability of Congress to find additional revenues to support the Highway Trust Fund – the source on average of more than 50 percent of highway and bridge capital investments made annually by state governments. If states delay projects over concerns about whether the next federal surface transportation bill is completed in a timely manner, this could temper 2020 market growth.
Overall, transportation construction market activity is expected to increase or be steady in half of the states. Some of the largest markets expected to remain stable or show growth include Arizona, California, Florida, Illinois, Michigan, Minnesota, New York, North Carolina, Texas, Washington, and Wisconsin. Recent funding increases in Ohio and Illinois should help programs in those states as new revenues are collected.
Other market factors include uncertainty over material prices, increased labor costs and potential labor shortages in some regional markets.
ARTBA estimates project costs rose 1.3 percent in 2019 (compared to 1.7 percent for general inflation) and 2.4 percent in 2018. The forecast assumes that project costs in 2020 and beyond will increase 2.3 percent as energy prices stabilize, which is in line with general inflation.
Overall, the price of various materials and other inputs for highway and bridge construction rose about 3 percent, according to ARTBA estimates of data from the U.S. Bureau of Labor Statistics. Energy costs for highway and bridge contractors, driven largely by diesel fuel prices, are estimated to have declined by 9 percent in 2019. Historically energy costs have been volatile, increasing or falling by as much as 20 percent or more in a given year.
Price data shows that average annual prices in 2019 for steel products – such as guardrails, scaffolds, gratings, bridge expansion joints, steel bars and tubing – were up between 2 and 3 percent, depending on the type of product, compared to 2018. The year before the same products had increased in the range of 6-19 percent. The cost of producing construction machinery tractor shovel loaders, mixers, pavers and similar equipment was up 5 to 6 percent in 2019. It is still difficult to isolate the impact of tariffs on the price of steel-related products from other market forces, such as the cost of energy, transportation or input materials.
But the uncertainty created by the steel and aluminum tariffs enacted in March 2018 will continue to have an impact on the highway construction market as contractors include that dynamic in their bids and cost structure. The larger threat of trade wars, to the extent that it would impact the overall U.S. economy, state and local revenues, could eventually also have adverse effects on transportation spending.
Industry employment for highway, street and bridge contractors was up 4 percent for all workers and 5 percent overall for employees on the job site, marking six years of consecutive gains. The average weekly hours worked has remained steady, indicating contractors are hiring more workers, rather than using more overtime with existing employees.
Industry wages for employees on job sites were up 3 percent in 2019, slightly above the average of 2 percent for all construction production workers. The real value of the industry earnings, when adjusting for inflation, increased 2 percent – the most substantial increase in real income for all workers in highway and bridge construction in four years.
More detailed information on each mode is included in the full report. By infrastructure mode, forecast highlights include:
Public and Private Highway, Street and Related Construction
ARTBA estimates that work on private highways, bridges, parking lots and driveways will increase from $69.1 billion in 2019 to $71.8 billion in 2020 and will continue to grow over the next five years as construction market activity increases in those sectors. This data is captured by the U.S. Census Bureau as part of residential and commercial construction investment. The real value of public highway, street and related construction work by state DOTs and local governments – the largest market sector – is expected to increase by 6 percent to $77.5 billion after growing 15 percent in 2019.
- Continued highway construction activity in major markets is expected to support national gains. State and local government highway contract awards are up in 26 states in 2019 compared to a three-year historical average, a leading indicator of highway construction activity in those states.
- The market impact of the $7.5 – $8.5 billion increase in federal transportation investment through the FY 2018, FY 2019, and FY 2020 appropriations process will vary, depending on the timing of state obligations and the awarding of projects through several U.S. Department of Transportation (DOT) discretionary programs. But overall, this boost will contribute to market growth in 2020.
- The increase in state and local revenues through user fee increases, bond programs, ballot initiatives and other funding mechanisms will support additional market activity next year. The exact impact will vary by state, and how the revenue increase is structured.
Of the 14 state markets that are $1 billion or more, representing over two-thirds of the market, contract awards were up or stable in 11 states last year compared to the previous three-year average. These states include California, Florida, Illinois, Michigan, Minnesota, New York, North Carolina, Pennsylvania, Texas, Washington, and Wisconsin.
Bridges and Tunnels
The pace of bridge and tunnel work stayed flat in 2019 and is expected to grow by $800 million, or 3 percent, in 2020. Bridge and tunnel market activity fell slightly from $28.8 billion in 2018 to $28.6 billion in 2019, after adjusting for project costs and inflation. Market activity is expected to grow to $29.4 billion in 2020, with the pace increasing 2-3 percent annually over the next five years.
- Based on recent contract awards data, work is expected to be up or stable in 15 states compared to three-year historical averages.
- Some states are continuing to focus on bridge work, but with a greater emphasis on repairs to the local network.
- Missouri recently issued a $50 million bond to support their bridge program. Kentucky recently announced a new six-year program that will repair 1,000 local bridges. Other states include Iowa, Kansas, Oklahoma, and West Virginia.
- The 2019 national market was driven by activity in six states, which account for over 40 percent of the market: California, Florida, New York, Pennsylvania, Texas, and Washington.
Light Rail, Subways, and Railroads (Graph 43)
Public transit and rail construction are expected to grow 5 percent from $23 billion in 2019 to $24.2 billion in 2020.
- Investment by private Class 1 freight railroads is expected to grow from $12.8 billion in 2019 to $13.2 billion in 2020.
- Subway and light rail investment are expected to reach record levels, increasing from $10.3 billion in 2019 to $11 billion in 2020.
- The recent federal appropriations bill and the 2015 FAST Act law provided a boost for public transportation investment.
- In addition to a dozen major subway and light rail projects underway, states awarding significant transit and rail contracts in the last year include: California, Illinois, Texas, Washington, Minnesota, Arizona, New York, Georgia and Massachusetts.
Airport Runways and Terminals (Graph 49)
The value of airport construction, including terminals, runways and related work, is expected to increase 6 percent from $23.2 billion to $24.5 billion.
- After growing 34 percent in 2018, airport terminal and related work, including structures like parking garages, hangars, air freight terminals and traffic towers, is expected to increase from $18.5 billion in 2019 to $19.6 billion.
- Runway work is forecasted to increase from $4.7 billion in 2019 to $4.9 billion in 2020.
- Some major states with increases in expected runway construction market activity include: California, Colorado, Florida, Georgia, Hawaii, New York, and Texas.
- There are currently 15 major airport expansion projects over $1 billion underway or about to begin in California, Colorado, Florida, Georgia, Illinois, New York, Pennsylvania, Tennessee, Utah, and Virginia.
Ports and Waterways
The value of port and waterway investment is expected to grow to $3.4 billion in 2020. Construction activity in 2019 was $3.3 billion, up from $2.5 billion in 2018.
- States with increased investments in recent years include: California, Florida, Illinois, Massachusetts, New Jersey, New York, South Carolina, Tennessee, Texas, Virginia, and Washington.
- Congress passed, and President Trump signed, the Water Resources Development Act of 2018 in October of 2018, authorizing over $9 billion in U.S. Army Corps of Engineers projects, with actual funding for the ventures pending the annual appropriations process. The U.S. Army Corps of Engineers (USACE) plans to spend $1.3 billion on inland waterway construction projects in FY 2020. This work is taking place in California, Florida, Georgia, Illinois, Idaho, Iowa, Kansas, Kentucky, Maryland, Minnesota, Michigan, Missouri, Massachusetts, Montana, Nebraska, New Jersey, North Dakota, Oregon, Pennsylvania, South Carolina, South Dakota, Texas, Washington, Wisconsin, and West Virginia.
- Following $17.4 billion in supplemental disaster recovery funds in FY 2018, Congress provided $3.3 billion as part of the 2019 Additional Supplemental Appropriations for Disaster Relief Act, of which $2.5 billion was for short-term repairs. This includes $1 billion for 103 local flood risk management projects in eight states, $908 million for emergency dredging and other priority operation and maintenance projects across 31 states and Puerto Rico, and $575 million for projects on the Mississippi River and tributaries.
ARTBA’s forecast is based on a series of proprietary econometric models for each mode and analysis of federal, state and local data and market intelligence. The full forecast can be purchased at www.artbastore.org.
This feature appeared in the January 2020 issues of the ACP Magazines:
California Builder & Engineer, Construction, Construction Digest, Construction News, Constructioneer, Dixie Contractor, Michigan Contractor & Builder, Midwest Contractor, New England Construction, Pacific Builder & Engineer, Rocky Mountain Construction, Texas Contractor, Western Builder