Infrastructure spending expected to fall in 2009 despite stimulus

LEXINGTON, MASS. – Despite an infusion of federal stimulus funds, infrastructure spending in the United States is expected to decline 4.3 percent in 2009. According to the Second Quarter 2009 U.S. Infrastructure Market Analysis from IHS Global Insight’s Construction Service, the infrastructure market has been a victim of large state government deficits and funding shortfalls to cities and towns. The forecasting firm expects infrastructure spending to decline 1.6 percent in 2010 and then grow 2.4 percent in 2011 as tax receipts improve for state governments and the federal stimulus package, totaling approximately $120 billion for infrastructure, is fully implemented.

Following is IHS Global Insight’s outlook by sector:

Power – Power construction, which includes power plants, electric distribution systems, natural gas and crude oil tanks, hydroelectric plants, and wind and solar energy facilities, should end 2009 nearly 1 percent higher than 2008. Lower building costs and slumping demand will reduce spending 16 percent in 2010; year-over-year declines will continue through the third quarter of 2011.

Highways and streets – Nearly $16 billion of the $48 billion allocated from the federal stimulus package has already been assigned to specific highway and street projects. However, this boost will be insufficient to keep real highway and street construction spending from falling 5.5 percent in 2009. This sector is not expected to see positive year-over-year growth until 2010.

Transportation – Transportation construction will struggle in 2009 with growth contracting 10.2 percent. During the next five years, spending on transportation construction will be supported by the promotion and construction of additional high-speed rail lines (see "States seek $102 billion for high-speed rail" on page 12) and port renovations resulting from the expansion of the Panama Canal (see "Panama Canal awards locks contract" on page 14). Transportation construction will grow 1.7 percent in 2011 and 1.2 percent in 2011.

Sewage/waste disposal and water supply – Construction spending for water and sewer infrastructure is expected to fall 6.5 percent in 2009 despite increased federal stimulus spending. Federal stimulus funds and the gradual recoveries in the economy and housing market should set this sector up for a strong rebound in 2010 and 2011, growing 9.8 percent in 2010 and 7.4 percent in 2011.

The complete Second Quarter 2009 U.S. Infrastructure Market Analysis Executive Summary is available online at www.ihsglobalinsight.com/constructionoutlook.