Demand for industry products was strong enough to prevent steep drops in revenue
New York, NY (PRWEB) May 23, 2014
The Road and Highway Construction industry was caught in heavy traffic during the five years to 2014. The recession slashed road and highway spending by local and state governments, which are the largest sources of industry-specific project funding. Nevertheless, federal government stimulus spending and other forms of support bridged some of the funding gap left over by regional deficiencies. Consequently, demand for road and highway construction was strong enough to prevent any steep declines in industry revenue. Consequently, during the five years to 2014, industry revenue is expected to drop at an annualized rate of 0.8% to about $69.0 billion, including a 0.4% decline in 2014 due to stagnant public sector spending.
According to IBISWorld Industry Analyst Maksim Soshkin, “During the recession, income levels fell and the housing market imploded.” As a result, local and state governments collected fewer taxes and had to increase welfare spending, causing deficits to rise. Yet, because governments at these levels are required 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, Congress passed a stimulus package, which, along with other infrastructure spending bills, offset regional government cuts and boosted demand for highway and road construction projects. Nonetheless, industry revenue resumed its descent in 2011 when benefits from the stimulus began to wane. Falling revenue and increased competition, especially at the local level, also caused industry profit to deteriorate, forcing companies to implement layoffs and wage cuts.
During the five years to 2019, 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, pushing industry revenue upward. “Economic growth will also lead to a healthier government budget, allowing for higher levels of public spending,” says Soshkin. Yet, elevated unemployment levels and 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. The private sector will be encouraged to help fill the investment gap through public-private partnerships.
For more information, visit IBISWorld’s Road & Highway Construction in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the Road & Highway Construction industry 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 subcontracting 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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