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US road construction market to increase by 3.5% through 2013

Press Release   •   Aug 07, 2013 16:09 BST

During the five years to 2013, the US road construction industry grew at an average annual rate of 2.8% to $49.7 billion. In 2013, revenue is expected to increase 3.5%; growth can be attributed to increases in government funding for highway projects.

The American Recovery and Reinvestment Act of 2009 sponsored many transportation ventures, resuscitating many stalled projects and funding others that would never have gotten off the ground otherwise.

While revenue has grown, highway contractors in the United States were not immune to the recession's negative effects. Falling demand from the private sector and decreased state and local government funding have drastically increased competition for federally funded projects.

As competition intensifies, operators are increasingly competing for projects on price; consequently, profit margins are suffering.
In the short term, there will be a small market improvement due to certainty in funding because of the new federal highway bill (MAP-21) passed in July 2012. The legislation means that states are more likely to start and fund medium scale projects (less than five years) with funding levels assured through FY2014.

However, long-term market prospects remain difficult as both state and federal governments refuse to increase their respective gas taxes or implement other use-based funding schemes.

Without expanded user-based fees, states will have to use more and more of existing funding to maintain existing infrastructure, and make more use of alternative financing schemes such as public-private partnerships (P3), state infrastructure banks and tolling to finance new construction. This will limit growth through the decade for all segments of the road construction market.

The industry is expected to return to moderate growth in 2013, with the new Surface Transportation Extension Act of 2012. Additionally, President Obama signed the Moving Ahead for Progress in the 21st Century Act (MAP-21) into law on July 6, 2012. This program funds surface transportation programs at more than $105.0 billion per year for the 2013 and 2014 fiscal years.

For more information of the US road construction market, see the latest research: US Road Construction Market

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