Tracking US Infrastructure Investing

Market Context & Scope

• U.S. public construction represents a $300 billion market, constituting roughly 21% of the total $1.4 trillion construction spending sector.
• The sector is generally stable regarding economic cyclicality but exhibits "project-driven cyclicality," characterized by surges in spending during active construction phases followed by declines.

Spending Trends & Recent Slowdown

• Infrastructure orders grew over 35% in states accounting for 80% of U.S. GDP over the past three years, while overall budgets increased only 50%.
• Infrastructure awards have flatlined on a trailing 12-month basis, marking a significant deceleration from the mid-teens growth rates seen in 2018–2019.
• The slowdown is driven by the completion of large-scale projects, such as the Tappan Zee Bridge, which saw outsized spending over five years but will see reduced capital allocation moving forward.

Regional Performance Disparities

• The Southwest region experienced 80% growth in infrastructure orders over five years against 40% budget growth, indicating a period of high activity that is difficult to sustain.
• The Northeast region recorded the lowest growth in infrastructure investment over the same five-year period, lagging in both budgetary allocations and actual highway awards.

Pandemic Impact & Fiscal Gaps

• Traffic activity is projected to decline by approximately 10% this year, creating a variable revenue shortfall.
• A $30 billion budget hole in the $300 billion public construction sector is expected to result from reduced usage fees and lower traffic volumes.
• Goldman Sachs Research and D.C. teams anticipate $100 billion in stimulus spending over three years, which is sufficient to cover the $30 billion revenue gap.

Public-Private Partnerships (PPPs)

• PPPs have not served as a meaningful contributor to the recent surge in infrastructure awards, with progress stalled due to fragmented state-level regulations.
• U.S. spending on PPPs remains at approximately $6 billion annually, a marginal figure compared to the $300 billion total public construction spend.
• Florida is noted as a state that has successfully leveraged PPPs, contrasting with the broader national landscape where rules and appetite for use fees vary significantly.

Forward-Looking Outlook & Deficits

• Public construction spending as a share of tax receipts remains 20% below historical averages, indicating substantial capacity for further investment.
• Civil engineering groups estimate a current infrastructure investment deficit of roughly $100 billion per year.
• Closing the $100 billion deficit will require continued revenue raises at the state and local levels, where the majority of capital allocation decisions are executed.