The Obama admin. has committed to develope a network of high-speed rail systems across the US

PR Log (Press Release) – Aug 03, 2009 – In BMI's United States Q309 Infrastructure Report we are forecasting the US construction industry to contract by 12.7% year-on-year in 2009, to reach a value of US$502.52bn.

Data for the construction industry's real growth in 2008 was released in late April 2009, and showed a 5.6% contraction in the industry, aligning almost perfectly with BMI's forecast for a 5.5% contraction in 2008. This confirms four years of year-on year contraction in the US construction industry, which BMI believes will reach its deepest point in 2009.

The country's infrastructure sector continues to be defined by turbulence, with some large projects making it through to the start of construction, and others falling at various hurdles. In the transport sector, good news came from the Port of Miami tunnel project, which after being awarded to the Miami Access Tunnel consortium in 2007, finally reached commercial close, with a construction cost of US$610mn, in June 2009. The next and much larger hurdle for the project is financial close, due in October 2009. In addition, the largest transport project currently taking place in the US got under way in June 2009 when construction started on the US$8.7bn rail tunnel under the Hudson River, linking New Jersey with Manhattan. However, a number of projects have stumbled over the quarter. The MidCo consortium, which was awarded the Chicago Midway Airport contract, had to cancel the bid in April owing to an inability to secure financing. In Florida, where there have been recent successes for road concessions, the plan to lease the Alligator Alley toll road was frustrated by the lack of any bidders.

The Obama administration has outlined its commitment to developing a network of high-speed rail systems across the US, with the release of a succinct strategy and the allocation of extra funding.

However, this still falls far short of what is required to develop a high-speed rail network, and therefore BMI expects progress to be slow on the plans.

In the utilities sector, the growing revival of the nuclear industry took centre stage, with 19 applications for federal loan guarantees for new projects, far outweighing the availability. Four proposals have reportedly moved on to the assessment stage. The development of wind and solar generating capacity also dominated headlines on new projects.

Despite activity in the sector, data released by the commerce department in June shows that compared with April 2008, construction spending was down 10.7%, which illustrates continued difficulties in both private and public sector investment into the industry. The former is stifled by the limited access to financing, which has been a key stumbling block in infrastructure projects, and is putting companies off getting involved in tenders. On the other hand, the public sector investments, led by the stimulus package funds, are likely to take time to filter through, as regulations to disperse the funds are put in place, and states submit potential projects. As of June, for example, just 1.2% of the stimulus funds for transport had gone through, according to the Transportation Department's weekly progress report. In addition, the time lag between the funds being deployed and jobs on the ground is substantial unless projects are what is known as ‘shovel ready'. However, if the public sector can push the funds through it will present an upside risk to our forecasts for 2009 and 2010.