Hurricanes may have slowed transportation growth, Fitch reports

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PHOENIX - Major hurricanes that have hit parts of the U.S. in recent weeks may lead to only modest growth in the transportation sector following a strong first half of 2017, Fitch Ratings said in a new report.

Fitch evaluated the fortunes of the airports, ports and toll road sectors in the rating agency’s just-released U.S. Transportation Trends report. The report noted that all three if those subsectors saw healthy growth through the first half of 2017, surpassing growth for the same period in 2016. But despite that good news, transportation investors can expect things to slow down due to the impacts of Hurricanes Harvey and Irma in the Southeastern part of the country and U.S. territories in the Caribbean.

“Growth will slow somewhat in the coming months following the fallout of Hurricanes Harvey and Irma, though steady broader economic growth will help absorb the short term shock of these storms,” said Fitch director Stacey Mawson.

Cargo movement through U.S. ports measured in 20-foot equivalent units (TEUs) for the first half of 2017 showed a year-over-year increase of 7.1%, well above real U.S. gross domestic product (GDP) growth of 0.3% and 0.1% seen in the first and second quarters of 2017, respectively, and up from the 2.5% TEU growth seen in the second half of 2016, Fitch found. Both coasts saw above average growth for the first half of 2017, with Fitch-tracked West Coast port volumes up 6.4% over the prior year. Fitch-tracked East Coast ports boasted an 8.1% increase for the same period, led by South Carolina and Houston.

“Ports will likely see growth in line with the movement of GDP, though volume may see short-term reductions due to the recent storms,” said Fitch director Emma Griffith.
Toll road traffic and revenues grew “moderately” in the first half of 2017, Fitch found, with average annual rates of 4.0% and 4.9%, respectively. The rating agency noted that harsh winter weather in the Northeast may have tempered growth somewhat, and that traffic growth in the Southeast and Southwest continue to outpace the Northeast.

“Roads in the Southeast and Southwest are likely to take a minor hit following the tolling shutdowns associated with the storms, though it should not alter the favorable outlook for the region over time,” said rating agency director Scott Monroe.

While U.S. enplanements grew at 2.6% for the first six months of 2017, below the 4.1% growth for the same period in 2016, both domestic and international traffic experienced growth of 2.4% and 3.1%, respectively, Fitch found. Nearly 82% of Fitch-rated U.S. airports experienced positive traffic growth for the first half of the year, with around 50% realizing 3% or higher growth, according to the report. The strongest performers among the large-hub airports were Newark, Boston Logan, Los Angeles and Denver.

“Airport growth will continue to level off due to a softening of capacity and traffic, which will likely carry over into 2018, said senior director Seth Lehman.

Rating outlooks across airports, ports and toll roads will remain mostly stable, Fitch said, with moderate growth likely to be offset by increasing capital improvement spending needs across all sectors. A national or regional economic slowdown would dampen traffic and revenue growth trends in affected regions, it said.

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