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A favorable mid-year outlook

As we compiled our annual Buyers’ Guide Issue, complete with new listings and references in admixture, fleet, plant equipment and other categories, one market indicator after another painted construction activity favoring investment in concrete production and delivery. Industry economists and market observers view the first half of 2015 positively, and confirm a moderate to upbeat outlook for at least the next three years.

Taking a global view of projected 2015 cement shipments—4.4 billion metric tons or 2.2 percent above 2014 figures—Portland Cement Association Chief Economist Ed Sullivan sees developed countries or regions increasing consumption by 9 million metric tons, on top of a slightly higher gain in 2014. Much of the increase is due to activity in the North American region, accounting for 7.4 million metric tons, or 82 percent, of the anticipated global gains this year. PCA sees global cement consumption recording sustained growth during 2015–2018, but at a less robust pace than previously expected—in the 2 to 4 percent range annually.

Stepped up activity at U.S. construction sites is confirmed coast to coast in an Associated General Contractors of America analysis of Labor Department data released late last month. Contractors expanded payrolls in 40 states and the District of Columbia from May 2014–2015, and in 28 states and D.C. from April to May this year.

“Construction has outpaced the overall economy in adding workers nationally but the mix of states with construction job gains keeps changing,” says AGC Chief Economist Ken Simonson. “The top 10 states for job gains from April to May had previously lagged in adding construction workers, while energy-producing and other states that had record construction employment a few months ago have slipped.”

States leading in construction employment gains year over year through May are California (46,600 jobs, 6.9 percent), Florida (28,200 jobs, 7.2 percent), Texas (20,300 jobs, 3.1 percent), Washington (18,100 jobs, 11.6 percent), and North Carolina (15,600 jobs, 8.8 percent). Idaho (11.8 percent, 4,200 jobs) added the highest percentage of new construction jobs. On the other end of the spectrum, 10 states shedding construction jobs since May 2014 are led by West Virginia (-12.3 percent, -4,200 jobs), Mississippi (-7.2 percent, -3,600 jobs), Rhode Island (-5.4 percent, -900 jobs), Maine (-2.7 percent, -700 jobs), and Ohio (-2.2 percent, -4,300 jobs).

The six states that added the highest percentage of construction workers in May were all in the Northeast, a region that has seen less growth in construction in recent years than other parts of the country. “Although most states are adding construction workers, only five have exceeded pre-recession employment peaks, and all five slipped in May,” Simonson observes. “This shows that the industry’s recovery remains vulnerable to a downturn in government investment in infrastructure as well as market forces.”

Employment data backs year to date gains that leading management consultant FMI is tracking in overall construction activity. The firm sees 2015 project volume growing 5 percent over 2014 figures, leveling off from the previous forecast of 8 percent in the first quarter of 2015. “Construction spending continues to build on the rapid growth experienced in the industry last year,” says FMI Senior Managing Director Chris Daum. Although the second quarter outlook is lower than last quarter’s, he adds, it still suggests 2015 logging the highest total for construction put in place since 2008.

FMI’s Q2 Construction Outlook examines 17 residential, non-residential and non-building sectors. The one with the best prospect is manufacturing, which continues to show gains despite several factors that point to slower growth for 2016, continuing through FMI’s forecast horizon of 2019. Tempered activity indicates the cyclical nature of manufacturing-driven construction, plus the strong dollar’s effect on U.S. exports. With a 5 percent cut on the horizon, the sector with the biggest setback is power, which remains in flux due to changing fuel supplies plus variable growth rates in alternative energy sources.