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% decline in cement consumption in 2008, followed by 11.9%
and 2.1% 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% in
2008 and 16.9% in 2009, but a rebound of the market in the second
half of 2010 will lead to a 12.1% increase in consumption in that
year. Consumption in the nonresidential sector is expected to decline 22.2% in 2009 and the public sector will see 6.6% 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% increase
compared to 2010 consumption and a return to near-record consumption levels
by 2013.
