United States Infrastructure Report Q1 2012
Includes 3 FREE quarterly updates
BMI View: We are confident that 2011 was another weak year for the construction industry and are therefore maintaining our 1.7% estimated contraction for the year. Our outlook for 2012 also remains largely in place, with a return to growth anticipated, albeit minimal, as the industry bottoms out and residential construction provides some support to a weak infrastructure sector. Over the medium-term, the industry will struggle to post growth, remaining within its long-term trend of low growth.
2011 signalled the seventh consecutive year of decline for the US construction industry, with a return to marginal growth anticipated for 2012. The trend has been that of a gradual easing of the contraction, which reached a trough in 2009, and will eventually reach positive territory in 2012 (0.6%). However, this is by no means an optimistic trend, and reflects more a bottoming out of the industry, as opposed to any sustained growth forces. This is especially true for the residential construction sector, where incredibly steep declines have left housing starts stagnating at around their lowest level since records began in 1959.
We are currently in a period where the infrastructure sector is experiencing little to no growth, and we expect this to continue until the end of our forecast period. Over the medium-term, the sector will struggle to post average annual growth of 0.9% between 2012 and 2015, slowing to just 0.6% average annual growth between 2016 and 2021.
Residential/Non-Residential Building – Diverging Stories Accounting for a combined 68% of construction industry value, these two sectors have been the main source of construction industry weakness since 2007, although not at the same time. Whilst residential construction pulled industry value into recession between 2007 and 2009, in 2010 just as residential construction started to bottom out, non-residential construction nose-dived.
The same trend continued into 2011. With unemployment levels remaining high and consumer confidence weak, we do not expect the construction of commercial real estate to rebound anytime soon. However, residential construction, which has lost almost 20% of its share over the last decade, looks to have bottomed out and we expect it should return to growth in 2012, driving the residential & nonresidential segment into positive territory (0.9% year-on-year).. Weak housing data over 2011 as a whole shows that the trend has not yet reversed; however, we are beginning to see signs of optimism, with stronger numbers for housing starts and new home sales in Q411 indicating that the worst is behind the US homebuilding sector.
Infrastructure: Trend Reversal Playing Out Infrastructure will no longer be the saving grace of the construction industry in the US, with our expectation for a contraction (the first since 2005) on track. We believe the industry contracted by 1.2% in 2011, driven primarily by transport infrastructure. Negative growth is expected to persist in 2012 (- 0.04%), as, in contrast to emerging markets, the election year in the US will see limited government support for infrastructure, due to the split congress and the focus on reducing the deficit.
Transport infrastructure is expected to see the biggest hit because it is almost exclusively government funded. The potential for high speed rail to lift industry value is looking less likely by the day, and whilst ports are seeking investment to capitalise on the Panama Canal expansion, a lack of funds is thwarting plans. The one area of potential is private investment into railway and ports, in response to increased exports of US coal.
On the other hand, power plants infrastructure industry value performed well over the course of 2011, driven primarily by investment into solar power and, to a lesser extent, wind. With federal incentives having expired in late 2011, we saw a rush to push projects through to benefit from tax credits and loan guarantees. Whilst this means numerous projects will see their construction completed in 2012, the project pipeline is expected to shrink drastically until the policy future is decided, meaning a slowdown in 2012 and a stagnation in industry value in 2013. On the other hand, the construction of new gas-fired power plants - to replace ageing and polluting coal power plants as more stringent EPA regulations come into place - will provide some solace, and therefore we do anticipate positive growth over the forecast period. However, this will be limited, as demand for new capacity is weak. Nuclear power, which would create significant value creation, is currently uncertain, with the majority of projects currently in the pipeline now stalled. Although the regulatory environment will see some small changes in response to Fukushima, we do not believe that this will put a stop to growth; rather it will be the high costs that do this, especially with gas prices depressed as a result of shale gas production.
BMI View: We are confident that 2011 was another weak year for the construction industry and are therefore maintaining our 1.7% estimated contraction for the year. Our outlook for 2012 also remains largely in place, with a return to growth anticipated, albeit minimal, as the industry bottoms out and residential construction provides some support to a weak infrastructure sector. Over the medium-term, the industry will struggle to post growth, remaining within its long-term trend of low growth.
2011 signalled the seventh consecutive year of decline for the US construction industry, with a return to marginal growth anticipated for 2012. The trend has been that of a gradual easing of the contraction, which reached a trough in 2009, and will eventually reach positive territory in 2012 (0.6%). However, this is by no means an optimistic trend, and reflects more a bottoming out of the industry, as opposed to any sustained growth forces. This is especially true for the residential construction sector, where incredibly steep declines have left housing starts stagnating at around their lowest level since records began in 1959.
We are currently in a period where the infrastructure sector is experiencing little to no growth, and we expect this to continue until the end of our forecast period. Over the medium-term, the sector will struggle to post average annual growth of 0.9% between 2012 and 2015, slowing to just 0.6% average annual growth between 2016 and 2021.
Residential/Non-Residential Building – Diverging Stories Accounting for a combined 68% of construction industry value, these two sectors have been the main source of construction industry weakness since 2007, although not at the same time. Whilst residential construction pulled industry value into recession between 2007 and 2009, in 2010 just as residential construction started to bottom out, non-residential construction nose-dived.
The same trend continued into 2011. With unemployment levels remaining high and consumer confidence weak, we do not expect the construction of commercial real estate to rebound anytime soon. However, residential construction, which has lost almost 20% of its share over the last decade, looks to have bottomed out and we expect it should return to growth in 2012, driving the residential & nonresidential segment into positive territory (0.9% year-on-year).. Weak housing data over 2011 as a whole shows that the trend has not yet reversed; however, we are beginning to see signs of optimism, with stronger numbers for housing starts and new home sales in Q411 indicating that the worst is behind the US homebuilding sector.
Infrastructure: Trend Reversal Playing Out Infrastructure will no longer be the saving grace of the construction industry in the US, with our expectation for a contraction (the first since 2005) on track. We believe the industry contracted by 1.2% in 2011, driven primarily by transport infrastructure. Negative growth is expected to persist in 2012 (- 0.04%), as, in contrast to emerging markets, the election year in the US will see limited government support for infrastructure, due to the split congress and the focus on reducing the deficit.
Transport infrastructure is expected to see the biggest hit because it is almost exclusively government funded. The potential for high speed rail to lift industry value is looking less likely by the day, and whilst ports are seeking investment to capitalise on the Panama Canal expansion, a lack of funds is thwarting plans. The one area of potential is private investment into railway and ports, in response to increased exports of US coal.
On the other hand, power plants infrastructure industry value performed well over the course of 2011, driven primarily by investment into solar power and, to a lesser extent, wind. With federal incentives having expired in late 2011, we saw a rush to push projects through to benefit from tax credits and loan guarantees. Whilst this means numerous projects will see their construction completed in 2012, the project pipeline is expected to shrink drastically until the policy future is decided, meaning a slowdown in 2012 and a stagnation in industry value in 2013. On the other hand, the construction of new gas-fired power plants - to replace ageing and polluting coal power plants as more stringent EPA regulations come into place - will provide some solace, and therefore we do anticipate positive growth over the forecast period. However, this will be limited, as demand for new capacity is weak. Nuclear power, which would create significant value creation, is currently uncertain, with the majority of projects currently in the pipeline now stalled. Although the regulatory environment will see some small changes in response to Fukushima, we do not believe that this will put a stop to growth; rather it will be the high costs that do this, especially with gas prices depressed as a result of shale gas production.
Contents
Executive SummarySWOT Analysis
US Infrastructure Industry SWOT
Market Overview
US
Special Focus: Fixing America’s D-Grade Infrastructure
Table: Still Flunking – American Society Of Civil Engineers Report Card For US Infrastructure
Global Materials
Industry Trend Analysis - Building Materials: Asia And Latin America Demand Drive EM/Developed Market Divergence
Industry Trend Analysis - Building Materials: Economic Weakness Undermines Hopes Of Demand Recovery
Table: US Construction And Infrastructure Industry Data
Table: US Construction And Infrastructure Industry Data
Construction And Infrastructure Forecast Scenario
Transport Infrastructure
Table: US Transport Infrastructure Industry Data
Table: US Transport Infrastructure Industry Data
Transport Infrastructure Forecast Scenario
Transport Infrastructure Overview
Table: Uniting The States Via Rail – The 10 Proposed High Speed Rail Corridors
Table: High Speed Rail Funding Awards
Major Projects Table – Transport
Table: Major Projects - Transport
Energy And Utilities Infrastructure
Table: US Energy and Utilities Infrastructure Industry Data
Table: US Energy and Utilities Infrastructure Industry Data
Energy And Utilities Infrastructure Forecast Scenario
Table: Renewable Targets By State – US States With Renewable Power Targets
Table: World Leader – US Wind Energy Facts, 2010
Major Projects Table – Energy And Utilities
Table: Major Projects – Energy And Utilities
Residential/Non-Residential Construction and Social Infrastructure
Table: US Residential and Non-residential Building Industry Data
Table: US Residential and Non-residential Building Industry Data
Residential/Non-Residential Construction Forecast Scenario
Residential/Non-Residential Construction and Social Infrastructure Overview
Major Projects Table – Residential/Non-Residential Construction and Social Infrastructure
Table: Major Projects Construction And Social Infrastructure
Business Environment
US Overview
PPPs: An Emerging Market
Virginia
Table: Case Study: Capital Beltway (I-495)/HOT Lanes
Table: List Of Highway PPP Projects In The State Of Virginia
Florida
Table: Case Study: Port of Miami Tunnel
Table: Case Study: I-595 Corridor Improvement Project
Table: List Of Highway PPP Projects In The State Of Florida
Texas
Table: Case Study: North Tarrant Express
Table: List Of Highway PPP Projects In The State Of Texas
The North East – Playing Catch Up: New York, Pennsylvania And Massachusetts
Massachusetts
New York
Pennsylvania
Private Activity Bonds
Table: Approved Private Activity Bonds (PABs) Allocations By The US Department of Transportation
Build America Bonds
Financing Clean Energy: Understanding Federal Loan Guarantees
Nuclear Energy Projects
Renewable Energy Projects
Table: Projects That Received First- And Second-Round Rewards
US Business Environment Ratings
Rewards
Risks
Regional Overview
Developed States Infrastructure Risks/Reward Ratings
Developed States: Infrastructure Risk/Reward Ratings
Company Monitor
Bechtel
Balfour Beatty US
Skanska US
Global Infrastructure Partners (GIP)
Infrastructure Finance In 2012: Déjà Vu?
Industry Forecasts
Construction Industry
Data Methodology
New Infrastructure Data Sub-sectors
Construction
Capital Investment
Construction Sector Employment
Infrastructure Business Environment Rating
Table: Infrastructure Business Environment Indicators Skip to top