PCA sees higher demand growth from 2014

PCA sees higher demand growth from 2014
13 September 2013

While an unusually wet spring and early summer impacted cement consumption in the first quarter of 2013, it has not put a dampener on the opportunity for strong growth in the construction sector in 2014 and beyond, the Portland Cement Association (PCA) writes in its latest forecast.

The industry association sees cement consumption increasing by a modest four per cent in 2013, but will approach double-digit growth in 2014 and 2015, with 9.7 per cent consumption increases in both years.

"Nearly two-thirds of the anticipated growth in 2013 cement consumption will be caused by gains in the residential construction market," Ed Sullivan, PCA chief economist said. "Home inventories are declining, signalling that it is time to start building, while the lingering effects of damaged credit due to foreclosure activity have created a robust apartment demand."

Just as recessions create a pent-up demand for consumer products like cars, it also builds demand for construction. While the economy is positioned for stronger growth, it needs a trigger to unleash this potential. The trigger lies with a willingness to spend and reinvest in capital. According to PCA's scenario consumer and business attitudes are expected to increasingly focus on the positive economic fundamentals rather than potentially adverse political uncertainty.

"Sentiment and confidence indices are extremely volatile. Business sentiment now stands at pre-recession levels," Sullivan said. "Assuming Congress has learned its lesson from the fiscal cliff and will take a more rational approach with the upcoming debt limit discussions, political uncertainty and its adverse impact on the economy is expected to dissipate."

Sullivan predicts an increase in local spending on public construction beginning in fiscal 2016. This is key to cement consumption recovery as road construction accounts for the largest area of public cement consumption. An 11 percent consumption gain is forecasted for 2016.

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