American Road & Transportation Builders Association (ARTBA) Vice President of Economics and Research Dr. William Buechner told European analysts that the U.S. highway construction market should grow 4.5 percent in 2005. The association’s top economist delivered his remarks during a day-long seminar at Café Royal in London.

Buechner, a Harvard-trained economist who served the Joint Economic Committee of the U.S. Congress for nearly two decades before joining ARTBA, says the value of construction work performed on highway and bridge projects should be a record $69 billion in FY 2005, up from $66 billion in FY 2004.

Market growth is being spurred by continued increases in federal funding and a stronger American economy, Buechner says. According to ARTBA, several factors should help support market growth in the year ahead:

State and local budgets are improving. General state tax revenues are rebounding. Economic growth is the best indicator of state and local funding for highway and bridge construction, Buechner says. The Bush administration’s August 2004 budget update predicts the economy will grow about 5.5 percent annually in current dollars between now and 2009. That should provide a solid base for more state and local government investment in highway construction in 2005 and beyond.

State and local DOTs will have more federal highway aid available in FY 2005 than FY 2004. Congress approved a record $34.4 billion for federal highway investment in FY 2005. On September 30, 2004, Congress also voted to shift $1.9 billion of FY 2004 highway funding into FY 2005. The result was to reduce FY 2004 funding of $33.6 billion to $31.7 billion and increase FY 2005 to $36.3 billion. The effective year-to-year increase would thus be $4.6 billion, ARTBA says.

A law signed in late 2004 by President Bush reforming the tax treatment for the sale of ethanol motor fuels should also yield an additional $3 billion in Highway Trust Fund revenues annually, Buechner adds.

Buechner cautions higher construction costs caused by dramatic increases in steel, cement and petroleum prices could impact the overall level of growth in 2005. The factors that generated strong cost increases in 2004, such as the weakening dollar and growing demand for construction materials in China, were unanticipated and are likely here to stay.

If steel, cement, and other materials stabilize at their current levels, the cost of highway construction in 2005 would be about two percent higher than in 2004, which Buechner says would absorb about half of the investment increase. If prices continue to rise at their current rate, they will likely consume most of the projected increase in the value of the highway construction market during the year.