Cement consumption may continue to decline
Without a stimulus package, 2009 cement consumption is expected to decrease 15.1% compared to 2008 levels, with an additional 8% forecasted for 2010. However, with an economic stimulus package that provides for infrastructure funding as well as state aid, consumption in 2009 could only be down 8.6% and 2010 could see an increase of 5.3%.
“The near-term stimulus to the economy can be enhanced by reducing the portion of the plan targeting tax cuts and placing more emphasis on state aid and traditional infrastructure spending,” Ed Sullivan, PCA chief economist, said at a press conference at the World of Concrete. “Only if tax, state-aid, and ‘shovel-ready’ programs materialize quickly might the rate of decline in cement consumption be moderated late in the year.”
The PCA report stressed that without substantial aid to states, the stimulus program could fail. State revenues are failing at a rapid rate due to job losses and declining sales tax revenue, and this is hindering the states’ ability to address all its programs. State balanced budget amendments will force tax increases, spending cutbacks. Without addressing state aid, PCA estimates that nearly 500,000 state employee jobs could be lost in 2009 and an additional 650,000 in 2010.
As a result, states needing to fund entitlement programs such as Medicaid will be forced to cut back on infrastructure spending.
“While tax cuts and increases in entitlement spending will add incrementally to construction activity and cement consumption, aid-to-states could make a more significant improvement in the cement outlook,” Sullivan said. “Roughly 50% of cement consumption is from the public sector and 90% of that is related to state and local projects.”