Rock Products

JAN 2019

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32 • ROCK products • January 2019 increase in direct federal spending through the federal-aid highway program, which by law must be spent largely on capital outlays, would support additional construction activ- ity across the country. Other factors include project costs and material prices, steel tariffs, and market capacity, according to Black. Among other findings in Black's forecast: Public & Private Highway, Street & Related Construction • The real value of public highway, street and related work by state DOTs and local governments – the largest market sector – is expected to increase by 5 percent to $66.5 billion after growing 4.5 percent in 2018. •  Work on private highways, bridges, parking lots and drive- ways will increase from $65.9 billion in 2018 to $69.1 billion in 2019 and will continue to grow over the next five years as market activity increases in those sectors. Bridges & Tunnels • The pace of bridge and tunnel work slowed in 2018, but is expected to grow 1.5 percent next year to $31.7 billion, with the pace increasing to over 2 percent annually in 2020 and beyond. Light Rail, Subways, & Railroads • Public transit and rail construction is expected to increase from $19 billion in 2018 to $20 billion in 2019, a 5.7 per- cent increase. •  Subway and light rail investment is expected to reach a new record level, increasing from $7.7 billion in 2018 to $8.2 billion in 2019. Airport Runways & Terminals •  After growing 38 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 $18.4 billion in 2018 to $19.2 billion, an increase of 4.5 percent. • Runway work, which was up 18 percent in 2018, is fore- casted to increase from $4.9 billion in 2018 to $5.1 billion in 2019. Ports & Waterways • The value of port and waterway investment is expected to grow 3 percent to $2.6 billion in 2019. Construction activity in 2018 was $2.5 billion, up from $2.2 billion in 2017. Construction Outlook Dodge Data & Analytics recently released its 2019 Dodge Construction Outlook – a mainstay in construction indus- try forecasting and business planning. The forecast predicts that total U.S. construction starts for 2019 will be $808 bil- lion, staying essentially even with the $807 billion estimated for 2018. "Over the past three years, the expansion for the U.S. con- struction industry has shown deceleration in its rate of growth, a pattern that typically takes place as an expansion matures," stated Robert A. Murray, chief economist for Dodge Data & Analytics. "After advancing 11 percent to 14 percent each year from 2012 through 2015, total construction starts climbed 7 percent in both 2016 and 2017, and a 3 percent increase is estimated for 2018. There are, of course, mount- ing headwinds affecting construction, namely rising interest rates and higher material costs, but for now these have been balanced by the stronger growth for the U.S. economy, some easing of bank lending standards, still healthy market fundamentals for commercial real estate, and greater state financing for school construction and enhanced federal fund- ing for public works. "An important question going into 2019 is whether decel- eration is followed by a period of high level stability or a period of decline," Murray stated. "For 2019, it's expected that growth for the U.S. economy won't be quite as strong as what's taking place in 2018, as the benefits of tax cuts begin to wane. Short-term interest rates will rise, as the Federal Reserve continues to move monetary policy towards a more neutral stance. Long-term interest rates will also rise, reflect- ing higher inflationary expectations by the financial markets. At the same time, any erosion in market fundamentals for commercial real estate will stay modest. In addition, the greater funding from state and local bond measures passed in recent years will still be present, and it's likely that federal spending for construction programs will increase once all the federal appropriations bills for fiscal 2019 are finalized. In this environment, it's forecast that growth for construction starts will decelerate further, but not yet make the transition to the point where the overall volume of activity declines. For 2019, total construction starts are forecast to hold basi- cally steady at $808 billion. By major sector in dollar terms, residential building will be down 2 percent, nonresidential building will match its 2018 amount, and nonbuilding con- struction will increase 3 percent." The pattern of construction starts by more specific segments is the following: • Single-family housing will be unchanged in dollar terms, alongside a modest 3 percent drop in housing starts to Outlook/Forecast 2019

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