Fitch Ratings says that U.S. transportation growth to remain “steady”

According to Fitch Ratings in its latest U.S. Transportation Trends special report, recent trade friction between the United States and China and the prospects for higher interest rates are not likely to affect growth for the major transportation segments for the foreseeable future.

Nonetheless, analysts warn that borrowing for capital programs may be curbed somewhat should the Federal Reserve continue to raise interest rates.

“High concentrations of fixed-rate debt in the transportation sector should offset any ripple effect higher interest rates could create,” said Senior Director Chad Lewis.

Senior Director Emma Griffith added that renegotiated trade agreements and steeper tariffs are likely to affect import/export volumes overall, with some U.S. ports possibly feeling the effects more acutely.

“Ports that handle large volumes of steel and aluminium are likely to bear the initial brunt of new tariff policy, though the full effect of these changes will take years to fully materialize,” she added.

In an interview with LM, Griffith said that  Fitch was tracking the ports of Mobile and Houston for the first impact.

“Even New Orleans and some of the West Cost ports might be affected,” she said.

Fitch director, Jeff Lack told LM that the air cargo sector would continue to remain strong, with new “mini-hubs” in small regional cities mitigating some of the presessure.

“A new cargo facility built near Chicago is doing surprisingly well,” he said. “We expect that kind of  traction to continue.”

Meanwhile, passenger traffic at U.S. airports is set to see growth moderate somewhat this year (2.5%-3.5% for 2018) with international hubs again leading the growth. Strongest-performing large hubs include Ft. Lauderdale, Newark, San Diego and Boston, though airports with fewer enplanements in Long Beach, Cincinnati, San Jose, and Burbank are seeing surges in traffic growth as well. Even so, “U.S. carriers are seeing some unit revenue and cost pressures that could lead to a softening of service additions,” said Senior Director Seth Lehman.

Not surprisingly, traffic and revenue growth for U.S. toll roads took a temporary hit during the latter half of 2017 due to Hurricanes Harvey and Irma in the southeast. However, traffic and revenues still rose by 2.4% and 2.3% yoy, respectively, in second-half 2017.

“Last year's hurricanes will amount to little more than a temporary jolt with toll road traffic and revenue growth set to return to levels we have grown accustomed to seeing in recent years,” said Director Tanya Langman.