Rapidly deteriorating economic conditions, caused primarily by
the sub-prime crisis, have prompted the Portland Cement Association (PCA)
to adjust its forecast for 2007 and 2008 cement consumption.
At his presentation at the PCA meetings in Chicago last week, chief
economist Ed Sullivan announced that PCA now expects 2007 cement
consumption to decline 6.8%, followed by a 1.8% decline in
2008. The new forecast assumed today's 50-basis point cut in the federal
funds rate as well as anticipated further cuts later this year and in early
"Right now the sub-prime crisis is viewed as an issue for the residential
sector," said Sullivan. "We believe that it will spill over into commercial
lending, hindering nonresidential construction activity. Additionally,
high inventory conditions in the residential market will suppress that
sector and slow down recovery efforts."
According to Sullivan, the sub-prime crisis will also bleed into consumer
spending. Consumer spending generates more than two out of every three
dollars of the U.S. economy. "When the growth rate of consumer spending is
impaired, it adversely impacts job growth and overall economic
Although year to date nonresidential construction spending is 17%
above 2006 levels, PCA forecasts a decline for 2008. And, as job growth
slows, so will public construction spending.