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Follow on Google News | Market Report, "United States Infrastructure Report Q2 2011", publishedRecently published research from Business Monitor International, "United States Infrastructure Report Q2 2011", is now available at Fast Market Research
The US construction sector, despite being the largest in the world has been in an almost constant state of decline over the past ten years. This culminated in a 15.6% real contraction in 2009, according to newly revised US Bureau of Economic Analysis (BEA) data. ------------------------------------------------------------ Full Report Details at - http://www.fastmr.com/ ------------------------------------------------------------ 2010 Return To Growth Following this deep contraction, BMI has long believed that construction would outperform in 2010, owing to a number of factors: * Base effects from the deep contraction in 2009. * Dispersal of federal funding for shovel-ready social and transport infrastructure projects as part of the American Recovery and Reinvestment Act (ARRA). * Federal funding mechanisms, Build America Bonds (BABs), Private Activity Bonds (PABs) and Transportation Infrastructure Finance and Innovation Act (TIFIA) loans, as well as loan guarantees for power projects. * Embracing of public private partnerships (PPPs) as a means of procuring infrastructure at the state level. * The relative pick-up in housing starts in mid-2010 owing to the expiration of tax breaks. The relative outperformance of the infrastructure sector was another core view; indeed, it was infrastructure growth which we anticipated would lift the construction sector out of recession. This outlook is also supported by recent events and activity in the sector. The share of infrastructure as a percentage of the construction sector rose further in 2010, accounting for 31%, compared to just 15% in 2005. Growth in all industry subsectors - excluding oil & gas pipelines - was the major reason, with strong growth experienced across the transport sub-sectors - especially roads & bridges, owing to federal stimulus funding - and power plant investments boosted by generous federal loan guarantees for renewable projects. The Best Has Been And Gone? However, BMI believes that 2010 was the pinnacle for the US construction sector. This is predicated on a number of factors: * The drawing to a close of federal stimulus funding, removing a successful stimulus for projects. * Grid lock in Washington which will persist until the 2012 election at the earliest. This is preventing transport investment packages making it through Congress as well as likely thwarting Obama's plans for an infrastructure investment bank. * The end of BABs. Over their two-year life span, BABs allowed for US$106bn worth of infrastructure investment nationwide (according to Reuters). * Continued fiscal constraints at state level are leading to a reduction in social infrastructure spending as well as transport investment allocations. * The failure of big-ticket infrastructure projects to take off, eg high-speed rail which has seen scant progress over the past two years, and nuclear, which was already struggling to translate into projects, but following the Fukushima crisis in Japan will now face even greater obstacles. * The slump in the housing market, which will persist as there is still significant oversupply, and consumer demand remains weak. * Commercial construction will remain weak owing to poor consumer demand, thwarting investments in shopping malls and leisure complexes. These factors are combining to dampen our outlook for the US construction sector over the medium term. Indeed, infrastructure will move from an outperformer in 2010, to an underperformer in 2011, as funding all but dries up. Some Glimmers Of Hope Despite this pessimism there are two bright spots on the US construction horizon. Industrial construction is likely to experience impressive growth in 2011 as US manufacturing experiences a boom. This is particularly noteworthy given the sharp contraction in the value of industrial projects executed over 2010, which fell by 25% year-on-year (y-o-y). The other bright spot is the potential for private investors to pick up some of the slack created by shrinking public sector investment. The potential for more states to turn to private concessions for infrastructure in light of tight local budgets is ever expanding. Indeed, the success of a number of projects over the past two years is inspiring other states to consider employing PPPs - or P3s as they are known locally - to improve infrastructure. With private sector construction companies desperate to break into the US, we see substantial demand for tenders. Indeed, some state funding tools remain available to private contractors to help them secure finance, and with the global credit market opening up, and the US infrastructure sector considered relatively risk free, there is little threat to the financial viability of projects. As BMI has often stated, political opposition is the key hurdle preventing a widespread adoption of private infrastructure investment. Once this can be overcome (on a state-by-state basis) the opportunities are significant, both for industry value creation, and construction companies looking for contracts. About Business Monitor International Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at http://www.fastmr.com/ About Fast Market Research Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156. # # # Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available. End
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