Demand for industry products was strong enough to prevent steep drops in revenue
Los Angeles, CA (PRWEB) December 06, 2013
The Road and Highway Construction industry was caught in heavy traffic during the five years to 2013. That is to say, the recession caused road and highway spending by local and state governments (the largest sources of industry-specific project funding) to decline. However, federal government stimulus spending and other forms of support were able to bridge some of the funding gap left over by regional authorities. Consequently, demand for road and highway construction was strong enough to prevent any steep drops in industry revenue. Over the five years to 2013, industry revenue is expected to drop by an annualized rate of only 0.7% to $67.5 billion, with a 0.8% decline in 2013, due to stagnant public sector spending.
During the recession, income levels fell and the housing market imploded. As a result, local and state governments collected less taxes and had to increase welfare spending, causing deficits to rise. Yet, because governments at these levels have to balance their budgets, spending cuts were made, causing local and state government investment and funding for roads, highways, streets and airports, to decline. Consequently, demand for industry-relevant projects also dwindled. However, according to IBISWorld Industry Analyst Maksim Soshkin, “Congress was able to pass a stimulus package, which, along with other infrastructure spending bills, offset regional government cuts and boosted demand for highway and road construction projects, preventing industry revenue from plummeting entirely.” Nonetheless, when benefits from the stimulus began to wane, industry revenue started declining in 2011. Falling revenue and increased competition, especially on the local level, also caused industry profit to deteriorate, forcing companies to implement layoffs and wage cuts.
The need to rebuild, expand and repair existing road infrastructure, coupled with rising congestion caused by urban sprawl, will push authorities to invest in industry projects. Economic growth will also lead to a healthier government budget and allow for more public spending. Yet, “elevated unemployment and a slow housing recovery will keep local and state budgets under pressure, while continuing budget disputes in Congress will temper public sector spending on industry projects,” says Soshkin. Consequently, the private sector will be encouraged to help fill the investment gap through public-private partnerships. The Road and Highway Construction industry has low market concentration, and is characterized by many small-scale geographically dispersed participants.
For more information, visit IBISWorld’s Road & Highway Construction in the US in the US industry report page.
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IBISWorld industry Report Key Topics
The Road & Highway Construction in the US construct new highways, streets, roads and airport runways (excluding elevated roadways). The industry also includes highway and street construction management operators and special trade contractors that perform subcontract work on projects (e.g. grading, laying pavement, installing guardrails and public sidewalks). Establishments may subcontract some or all of the actual construction work.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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