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United States Infrastructure Report Q4 2012 - New Market Research Report

New Construction research report from Business Monitor International is now available from Fast Market Research


Boston, MA -- (SBWIRE) -- 01/02/2013 -- Leading construction data is reinforcing our long-held view that the US construction industry will return to growth in 2012. In fact, the data implies a more positive investment climate for the sector than we had previously factored in, and thus we are upgrading our 2012 growth estimate to 1.2%, with further upside potential. The key growth divers remain the energy and utilities sector, as well as the ongoing revival in residential construction.

Construction spending data for the first seven months of the year shows a significant increase in investment in the sector, which indirectly feeds through to our forecast for construction industry value added. Between January and July 2012 construction spending has increased 7% year-on-year (y-o-y), making it the first year of growth in construction investment since 2006.

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As anticipated, growth is being driven primarily by the nascent recovery in the residential building sector. The sector has finally bottomed out following five years of contraction, and we subsequently see potential for growth. We are also seeing a revival in non-residential building, although demand for commercial property is still weak.

Conversely, and also as expected, infrastructure investment is lagging other aspects of construction. With political gridlock delaying spending approvals, and state and local governments strapped for cash, the only glimmer of hope is from private investment, which only accounts for 37% of infrastructure investment. However, we do see some sector variation, with publicly funded transport projects lagging behind private funded energy projects.

Transport Finally Moving?

We are maintaining our bearish outlook for US transport infrastructure industry value over the near term despite the passing of a new, US$105bn surface transportation bill in July 2012. Between 2013 and 2016 we anticipate real growth of just 0.6% in transport infrastructure industry value. Although the approval of a transportation bill following several extensions provides a more comprehensive and organised approach to transport spending, its value is lower than previous bills. However, the bill does present some upside potential to the roads and bridges sector through the expansion of the Transportation Infrastructure Finance and Innovation Act (TIFIA) programme. TIFIA, which provides credit assistance for transport projects, has been crucial in allowing highway public-private partnerships to close financing, and therefore a US$1.7bn expansion approved as part of the transportation bill is good news for this model of investment. With each US$1 of federal funding able to provide US$10 in TIFIA credit assistance, it has the potential to leverage US$17bn in loans, equal to US$20-30bn in projects.

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