How the Fiscal Cliff Could Crush Transportation

Fitch Ratings has a report out this Monday showing its expected impact on the transportation based upon a GDP impact from the coming (and still tentative, hopefully) Fiscal Cliff. The report shows as much as a drop of 2% to only 0.4% in growth, but it also refers to “increased unemployment to upwards of 10%” in the worst case scenario. By now you have figured out that the fiscal cliff would be bad for just about all segments of the broad economy but Fitch is focusing today on the impact to the transportation sector.

Michel McDermott, Managing Director and head of the U.S. Transportation team, said he does not expect that Congress will allow the cliff to play out in the worst case, Still, he said, “But were it to occur, the effect on airports, roads, tunnels and bridges could be significant and could pressure ratings.” He went on to project that airport traffic could be down as much as 5% depending upon the degree of cuts. Fortunately, even the depths of the fiscal cliff are not expected to match the most recent recession.

The report is aimed at transportation infrastructure providers, but this would really have an impact on all aspects of the transportation sector as well. Fitch recommends for ratings stability that cost cutting and deferral of capital spending should be considered in order to maintain current levels of financial and operational flexibility.

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