There has been much talk lately about the tone of construction spending. Two ways to profit jump quickly to an investor's mind. One is residential construction, which includes single-family homes and multi-family homes, such as apartments, condos and the like. The other is nonresidential construction, which encompasses more than 15 subcategories, from manufacturing and power to educational and commercial.
While it may come as a surprise to some, the largest component of the nonresidential category comprises highway- and street-construction spending. In fact, these accounted for just more than 22% of March spending in the nonresidential patch. It was this particular line item that came into focus this week as we were reminded about the sad state of our roads and bridges at a time when we face yet another funding crisis.
In a bid to address the sad state of America's roads and bridges, as well as jawbone yet another opportunity to put Americans back to work, President Obama talked this week about passing a bill to improve the country's crumbling infrastructure before existing funding runs out at the end of this summer. There were several photo-op appearances, includingWednesday'sremarks from President Obama in front of the Tappan Zee Bridge in New York's lower Hudson Valley. The more-than-16,000 foot cantilever bridge is in a state of disrepair after years of overuse; a replacement Hudson River bridge is expected to open in 2018.
While we've narrowly averted a fiscal cliff or two of late, by the end of this August, the federal Highway Trust Fund will face what is increasingly called a "transportation cliff" -- a $64 billion shortfall through 2018. Backed by gasoline taxes to the tune of an 18.4-cents-per-gallon tax on gas and a tax of 24.4 cents per gallon on diesel, the fund hasn't been able to keep up with spending demands, since Americans are spending less on fuel. Given the impact of highway and bridge construction dollars and the number of jobs at stake, I would argue President Obama cannot afford another lost opportunity to create jobs, as occurred when the administration blocked the Keystone Pipeline project.
The problem is America's highways and bridges -- and other critical parts of the nation's transportation infrastructure, such as railways and our water infrastructure -- are in dire need of repairs and upgrades. The American Society of Civil Engineers gives U.S. infrastructure a D+ in terms of condition and performance.
Chris Versace is the editor of PowerTrend Brief — a FREE, weekly electronic newsletter. He also writes PowerTrend Profits, a paid monthly newsletter that helps individual investors profit through buying shares of companies poised to win big in the 8 PowerTrends, as well as writes the PowerTrader trading service that seeks to deliver short-term gains using stocks, ETFs and options. Chris has been ranked an All Star Analyst by Zacks Investment Research.
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