Pca Economist Cites Sub-Prime Crisis In 6.8 Percent Powder Consumption Drop

Deteriorating economic conditions tied to the sub-prime mortgage crisis have prompted Portland Cement Association (PCA) to adjust downward portland cement

CP STAFF

Deteriorating economic conditions tied to the sub-prime mortgage crisis have prompted Portland Cement Association (PCA) to adjust downward portland cement consumption for 2007 and 2008. Addressing PCA member meetings in mid-September, Chief Economist Ed Sullivan noted that cement consumption for 2007 is pacing a 6.8 percent decline against 2006 shipments, while 2008 will bring an additional 1.8 decline compared to this year.

The new forecast assumed the 50-basis point cut in the federal funds rate as well as anticipated further cuts later this year and in early 2008. 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.

The sub-prime mortgage crisis will also bleed into consumer spending, which generates more than two out of every three dollars of the U.S. economy, he added. When the growth rate of consumer spending is impaired, it adversely impacts job growth and overall economic performance.

Although year to date nonresidential construction spending is 17 percent above 2006 levels, Sullivan sees a decline for 2008, a trend likewise reflected in public construction spending attributable to slower growth in jobs creation.