A moderate decrease in the 2008 and 2009 cement consumption forecast by Portland Cement Association Chief Economist Edward Sullivan further underscores
A moderate decrease in the 2008 and 2009 cement consumption forecast by Portland Cement Association Chief Economist Edward Sullivan further underscores the lingering negative effects the U.S. economy is having on the construction industry. The latest PCA forecast predicts a 12 percent decline in cement consumption in 2008, followed by another 6.0 percent drop in 2009. These numbers represent 1.0 percent and 0.5 percent drops from Sullivan’s previous forecast, published in the late spring. They also come on the heals of a grim statistic indicating that over a four-year period cement consumption will see the worst decline, on a percentage basis, since the Great Depression.
Real construction activity is expected to decline 9.0 percent in 2008, and another 7.0 percent in 2009, Sullivan says. The combination of high home inventories, weak economy-wide demand conditions, and poor state budget conditions will hit all sectors of construction Û residential, nonresidential and public.
Although PCA had expected a downturn in nonresidential construction to occur in the third quarter of 2008, this sector is working on the backlog of projects already under contract and seems consistent until closer to the end of the year. However, the trend in contract awards for the future is alarming. In the first five months of 2008, there was a 29 percent decline in nonresidential contract awards. If these trends hold true, a similar intensity will materialize in 2009, Sullivan explains.
The majority of cement consumption occurs in the residential and public sectors. High inventories will suppress housing starts and residential cement consumption until 2010. State budget shortfalls attributed to increased spending in entitlement programs, such as Medicare, and decreased revenue from job losses will result in a 4.8 percent drop in cement consumption by the public sector in 2008, followed by two additional years of decline. PCA predicts a recovery to begin in 2010, but more modest than previously forecasted. Total cement consumption in 2010 is expected to increase 2.7 percent from 2009 levels.