Continued Decline Projected for Cement Consumption
PCA says sub-prime crisis to extend into next two years.
At his presentation at the October 2007 Portland Cement Association (PCA) Board Meeting, chief economist Ed Sullivan said the PCA expects 2007 total cement consumption to decline 6.9 percent, followed by a 2.5-percent decline in 2008.
Sullivan believes that as the economy weakens (due in large part to the sub-prime crisis coupled with increased energy costs), overall non-residential construction will see falling numbers, negatively affecting cement consumption. Further, the housing market, according to the PCA forecast, is not expected to rebound until mid-2009.
“Our forecast anticipates the impact of a significant economic growth slowdown on the construction industry, but does not predict a recession,” said Sullivan. “A recession scenario is a much grimmer picture.”
Skokie, Ill.-based PCA anticipates the Federal Reserve to reduce the interest rate 75 basis points during the next three quarters. However, if the impact of the sub-prime crisis is worse than expected and energy costs hit consumers harder, a recession is possible, the association reports.
“If a recession occurs, construction spending will decline nearly 13 percent, causing a 10-percent decline in 2008 cement consumption and decreasing kiln utilization rates to 85 percent,” said Sullivan. “An additional 3.8-percent consumption decline would occur in 2009, followed by growth in 2010.” MD