Economics week of the 8th

The surface transportation and energy bills that President Bush signed into law on Wednesday and Monday, respectively, should both provide a modest but sustained boost to several categories of construction. Federal aid to state highway spending will rise by $1-2 billion per year from current levels, starting immediately. Most of this money will go into highway construction, although some will show up in transportation structures such as port and intermodal facilities. Transit facilities will also receive additional funding. The energy act provides tax incentives and reduces some regulatory roadblocks to construction of various alternative energy generation facilities and to equipping or retrofitting structures with energy-efficient systems. The amount of construction these provisions will trigger is hard to predict, as it depends on the relevant after-tax current and projected prices.

The added spending on highway construction may worsen widening cement shortages. New Mexico and South Dakota joined the list of 30 states and the District of Columbia where shortages or tight supplies have been reported to AGC or the Portland Cement Assn. (PCA) this year. On Thursday, the governors of New Mexico, South Dakota, Utah, and Nevada wrote to Commerce Secretary Carlos Gutierrez to “respectfully request that you take the appropriate steps to resolve U.S.-Mexico cement trade issues in order to provide immediate access to this critical supply of cement.” Today, AGC CEO Stephen Sandherr wrote to the four governors to thank them and express the “hope that Commerce officials and domestic producers will act promptly.” PCA raised its forecast to a 5% gain in cement consumption in 2005 from a 3% estimate last spring.