PCA revises cement forecast downward

PCA revises cement forecast downward
Published: 10 November 2008

The weak economy and tight credit conditions, coupled with severe job losses and the resulting decline in state government revenues, will translate into significant weakness for the construction industry through 2010, leading the Portland Cement Association (PCA) to again adjust its cement consumption forecast.

The latest PCA forecast of cement, concrete, and construction predicts a 12.8 percent decline in cement consumption in 2008, followed by 11.9 percent and 2.1 percent declines in 2009 and 2010, respectively.

The PCA report cites the continued drop in residential starts and the erosion of the strong fundamentals supporting nonresidential construction as major factors leading to reduced cement consumption. The weak economy also has affected the public construction sector.

“Several economic factors are negatively influencing the construction industry,” Edward Sullivan, PCA chief economist said.  “High energy prices, the sub-prime crisis, the melt-down of our financial markets, inflation, job losses and tight lending standards are combining to create weak economic conditions and the emergence of huge state deficits.  Public construction accounts for nearly half of all the total cement consumption in the U.S., and states in poor fiscal condition will need to cut back on this spending.”

PCA expects cement consumption in residential to decline 31.7 percent in 2008 and 16.9 percent in 2009, but a rebound of the market in the second half of 2010 will lead to a 12.1 percent increase in consumption in that year.  Consumption in the nonresidential sector is expected to decline 22.2 percent in 2009 and the public sector will see 6.6 percent declines in 2009 and 2010.

“The nonresidential construction market typically takes 18 months from the onset of better economic conditions to rebound,” Sullivan said.  “With weak consumer spending, this sector will be especially hit hard in retail construction.”

PCA predicts a recovery to begin in 2011 with a 10.3 percent increase compared to 2010 consumption and a return to near-record consumption levels by 2013.