January 3, 2012
For the full forecast and analysis from Better Roads Editor-in-Chief John Latta, see the January 2012 print edition of Better Roads.
It’s frustrating (again) to have to say it, but it appears that this new year will offer us more of the same. Last year virtually repeating itself, as did the year before that and the year before that.
But this time there appears to be at least some optimism that the economy’s vicious cycle may be approaching its end, albeit with more of a whimper than a bang. And within a handful of bright, or at least not gloomy, spots there may be opportunities for transportation agencies and highway and bridge contractors to be pro-active in their fight against the agonizingly slow recession climb-out.
Not only is reauthorization a pivotal event (whether it happens or doesn’t) but also the states’ struggles to fund even essential work, and the need, that can no longer be put off, to do repair or maintenance work will be key influences. And then there is an election in November. As one leading transportation industry group analyst told Better Roads in Washington, D.C., in December: “2012: It’s a make-or-break year for transportation infrastructure.”
As the American Road and Transportation Builders Association (ARTBA)’s Dave Bauer points out, there are “50 autonomous markets” out there, making it not only difficult to come up with a single estimate for the United States, but also meaning that amid a sea of gloomy news there can be patches of economic sunshine that could make 2012 a very different place for some local or regional contractors and agencies.
A look at some of the leading forecasts for 2012 find a general agreement on the course the year will follow.
If economic forecasting is something of a crystal ball process, 45 professional forecasters surveyed by the Federal Reserve Bank of Philadelphia may be the best gazers in the business. These forecasters, surveyed by the Fed in November, predicted, on average, a real GDP growth of 2.4 percent in 2012 (the same figure that the National Association for Business Economics predicts; but Morgan Stanley and Kiplinger estimates are closer to 2 percent) and a 2012 unemployment rate of 8.8 percent. The Fed’s forecasters predicted growth of 2.7 percent in 2013 and 3.5 percent in 2014. The forecasters also predicted unemployment at 8.4 percent in 2013 and 7.8 percent in 2014. They expect nonfarm payroll employment to grow at a rate of 123,200 a month in 2012, compared to 106,500 a month in 2011. These same Fed forecasters estimate core Personal Consumption Expenditures (PCE) inflation in 2012 will average 1.6 percent, and 1.8 percent in 2013.
A Wall Street Journal survey of 52 economists in November put GDP growth in 2012 at 2.3 percent and 2.6 percent in 2013, with unemployment at the end of 2012 at 8.7 percent, and at 8.1 percent at the end of 2013.
But there seems to be little doubt the unemployment rate in construction, including transportation infrastructure, will exceed the national average through 2012 as it did, by a wide margin, through 2011.
Because the Federal Reserve is keeping the lid on short-term interest rates and also trying to bring down already low long-term rates, various estimates suggest there will be little significant movement of rates in 2012.
The election has the potential to be very influential to highway and bridge industries both before and after the polls close. “2012 is an election year, which does not body well for meaningful action in Washington,” says Association of Equipment Manufacturers (AEM) President Dennis Slater. “Both sides are already in full ‘campaign mode,’ it seems, and this presents a real danger of a stalling economy.” But the November elections may also offer some possible cause for optimism. A late-winter or early spring reauthorization, increasingly finding bipartisan support and looking more and more likely, might well help cement the idea in the public mind that transportation infrastructure is one of the essential investment programs for America’s future.
This in turn may well become a position that might replace the refuse-to-spend-anything stances of some hardline politicians. Transportation investment may also be reasonably popular in the new Congress of 2013 which could be more supportive of transportation infrastructure funding than this one.