CAN HIGHWAY SEGMENT LIFT ECONOMY?
Throughout the economic slump of the past two years, road building contractors remained busy with lucrative road and bridge building contracts. Unfortunately, this sector may not have enough steam to continue to outpace the overall economy.
In a recent report, management consulting firm Farkas Berkowitz & Co., Washington, notes that there will likely be fewer federally-funded highway projects in 2003, and state governments are unlikely to pick up the slack. "For federal fiscal year 2003, it appears that federal grants will be cut by 13 percent from the FY2002 level," says Alan Farkas. "More importantly, state and local transportation departments face significant cuts in funding as a result of reduced tax receipts."
State governments in several parts of the country have shifted from managing surpluses to coping with budget cuts as sales tax and income tax revenues have declined with the cooled-down economy. In Tennessee in early July, fully half of the state’s workforce was kept home on unpaid leave as lawmakers groped to find a solution to the Volunteer State’s budget deficit.
But another Congressional re-authorization is due for what was originally called ISTEA (Intermodal Surface Transportation Equity Act) and the TEA-21 (Transportation Equity Act for the 21st Century). The re-authorization process typically results in senators and congressional representatives vying to have big-ticket construction projects approved in their respective states and districts. "The Act should be re-authorized in a timely way and at higher funding levels," predicts Farkas.
BIOMASS PLANT COMING TO OHIO |
MAY CONSTRUCTION MARKET ACTIVE
All three construction segments—residential, non-residential and infrastructure—increased new contract activity compared to April, according to McGraw-Hill Construction, New York.
"The improved activity in April and May shows the construction industry climbing back to last year’s pace, when the Dodge Index averaged 149," says Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction.
Overall, new construction starts increased 4 percent in May to a seasonally adjusted annual rate of $497 billion, according to the Dodge Division of McGraw-Hill Construction. The latest month’s data raised the Dodge Index to 150 (with 1996 equaling 100), compared to an index figure of 144 for April.
The nonresidential building segment in May climbed six percent to $156.6 billion, helped by strong gains in several institutional categories, including health care facilities and amusement-related work, spurred on by the start of a $131 million convention center in Hartford, Conn. Major projects also include a prison in Indiana, a cargo storage facility at New York’s JFK International Airport and an airport terminal expansion in Tucson, Ariz.
Commercial construction improved in May, with hotels up five percent, stores up eight percent and warehouses up 16 percent. Office construction in May eroded one percent.
Manufacturing plant construction further weakened 14 percent, while school construction settled back 13 percent following an exceptionally strong April.
Residential construction
was up two percent in May. A 13 percent boost for the multifamily side of the market led the way, while the larger single-family sector grew one percent. By region, residential building in May grew in the West, up five percent; the Northeast, up four percent; the South Central, up three percent; and the South Atlantic, up two percent. However, the Midwest declined one percent.In the nonbuilding construction or infrastructure category, new contract values grew three percent in May. Much of the upward push came from a 19 percent gain for electric utilities. May featured the start of large power plant projects in South Carolina ($450 million), two in Indiana ($400 million and $211 million), and another in Texas ($105 million).
The pattern for public works in May was mixed—the largest public works category, highway construction, was up seven percent; and river/harbor development work advanced 10 percent.
On the negative side, May witnessed decreased contracting for bridges (down two percent), water supply systems (down 13 percent) and sewers (down 17 percent).
During the first five months of 2002, total construction on an unadjusted basis maintained a one percent lead over the same period of 2001. By sector, residential building was up 10 percent, followed by a one percent gain for non-building construction. In contrast, nonresidential building trails its 2001 pace by 11 percent.
Regionally, total construction showed this pattern during the January-May period: The Northeast and Midwest, each up seven percent; the South Atlantic, up six percent; the West, down four percent; and the South Central, down 10 percent.
Explore the August 2002 Issue
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