Highway Construction Costs Skyrocket
Inflation is everywhere; that much is obvious. But one place that it appears to be hitting stronger than in other areas is the cost of repairing and building new roads for the nation’s lifeblood: highways.
Details
The Federal Highway Administration (FHWA) has what it calls the National Highway Construction Cost Index (NHCCI), which you can see a graph of on the relevant webpage. According to the index, the cost of repairing a road increased by 3.6% from the final quarter of 2022 to Q1 2023. Compounding this for four quarters, and assuming the rate of change remains the same for every three month piece of the pie, that means at 15% year-over-year increase.
This news proves to be a bit of a headwind for the Biden Administration, who’s Infrastructure Investment and Jobs Act of 2021 puts $350 billion into state and local governments through 2026 to provide funding for road repairs, bridge construction projects, and more.
The news of inflation goes even further back in time than just the start of 2023. The Bureau of Transportation Statistics reports that “Over the [last] 10 quarters [Q42020-Q12023], highway construction costs grew 53.8%.”
An economic analyst from the FHWA says that the primary driver for the increase in infrastructure project prices is the cost of labor. “When looking at asphalt, for example, costs for ‘labor, transportation or price markup’ may be driving that portion of the cost increase as opposed to the cost of the material itself.” The demand for higher wages is likely due to the increased cost of living being felt by these workers, meaning that inflation is driving inflation, as it typically does.
Conclusion
This does not mean by any stretch of the imagination that the United States is headed for an inflationary crisis such as those experienced by Argentina (185%), Venezuela (1,000,000%), or Zimbabwe (89,700,000,000,000,000,000,000%), but that the prices of everything need to catch up to what we have been seen for food and energy costs. Regardless, we hope it will reach the steady target of 2% per year soon.
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