Data points influencing U.S. water sector investment begin with 49,000 drinking water systems and 16,000 wastewater treatment facilities. But when analyzing and forecasting the overall water market trajectory, it’s crucial that we consider not just water market data and trends, but also a host of ever-changing macroeconomic factors that will influence the sector. Below are a few market indicators that our water experts considered when evaluating market scenarios for CAPEX & OPEX forecasts.
The ebb and flow of material prices shape water infrastructure outlook: From September 2020 to September 2022, the price of plastic and iron & steel pipes have increased 134.3% and 93.6%, respectively. While key material inputs have stabilized in recent months—declining in some cases—supply shocks have taken on an outsized role in utility and engineering company decisions. The impacts include project deferrals, rebidding, and driving searches for alternatives.
Bluefield tracks material prices, historically, and if history is any guide, they are not likely to return to pre-pandemic baselines. High material prices threaten to push up costs for both capital projects and day-to-day operations & maintenance for utilities.
Housing market volatility alters new infrastructure investment: Nearly two-thirds of pipe network CAPEX, according to Bluefield’s forecasts, is associated with new infrastructure buildout. The underlying factor in this growth is new home additions from the Sunbelt region to the Rustbelt region.
In March 2022, new U.S. home construction rose to its highest level since 2006. Since then, the U.S. Federal Reserve’s interest rate hikes have signaled warning signs to potential new homebuyers. With new housing start permits for single-family homes falling by 34% from March 2022 to September 2022, the writing is on the wall for hardware and equipment firms relying heavily on water utilities, whose revenues are being affected by the decline in housing starts.
Demographic shifts reshape a post-pandemic world: From 2010 to 2020, urban populations increased 8%, whereas rural populations declined 0.5%. However, the COVID-19 pandemic, coupled with a shift to remote work, is set to reshape the long-term demand for water and wastewater investment. While gross expenditures are still on pace with historical trends, the net investment impacts—utility revenues and tax base declines— is changing.
In contrast to prior decades, suburban-rural communities are now set to see a surge in demand for water system upgrades, new facilities, and rehabilitation, whereas utilities serving urban centers may see potential downsizing of assets going forward.
Whether we are looking at M&A deals, global digital water growth, or utility CAPEX spend, it’s important that we consider a range of evolving market factors, both water-specific and macroeconomic, in general. For that reason, Bluefield continues to roll out new datasets through our Data Navigator platform—utility asset data, project data, infrastructure funding, market forecasts, macroeconomic trends, and company data—that play critical roles in influencing how companies address the changing landscape. Let’s make smarter, data-driven water decisions together.
