Landscape Architect Articles

2010 Portland Cement Association Report12-30-10 | News

2010 Portland Cement Association Report

Edward Sullivan, Portland Cement Association chief economist.

The Portland Cement Association?EUR??,,????'?????<

According to the forecast, the economic momentum that was gathering steam early in the year has dissipated to a large extent. Consumer and business confidence, key ingredients in sustaining momentum, have waned. Private sector growth, as a result, has entered a period of slowdown. In addition, the PCA says American Recovery and Reinvestment Act stimulus funds will increasingly fade as a positive for economic growth.

The forecast notes that economic growth will probably not become strong enough to generate more robust job gains for some time?EUR??,,????'?????<

Consumer and business confidence, key ingredients in sustaining momentum, have waned. Private sector growth, as a result, has entered a period of slowdown. In addition to stimulus funds increasingly fading as a positive for economic growth, massive job cutbacks since the recession began have made many businesses unable to meet incremental increases in demand without at least adding to temporary payrolls.

?EUR??,,????'?????<

Stimulus funds generated as a result of the American Recovery and Reinvestment Act (ARRA) will begin to fade as a positive for economic growth, the PCA predicts. The PCA believes states that have been slow to spend ARRA dollars during 2009 are likely to see a higher commitment to ?EUR??,,????'?????<

Residential Outlook
Homebuilders are unlikely to significantly accelerate construction activity until two critical conditions are met, including: 1) low levels in inventory of unsold new homes reflecting no higher than five months supply, and 2) stable or rising home prices. Both conditions are likely to be required to insure an adequate return on investment (ROI ) for homebuilders to spur an increase in building activity. Lacking either condition, a substantive recovery in home building will not materialize.

Given this, analysis of the residential sector becomes very simple. A significant improvement in residential construction cannot begin until the foreclosure crisis is over. This is not expected to materialize until 2012. High level of foreclosure activity increases inventory levels and depresses home prices?EUR??,,????'?????<

PCA expects a generally flat single-family housing starts scenario will unfold for 2011. In 2009, single family starts totaled 440,000 units, rising to an estimated 476,000 units in 2010. PCA expects 2011 housing starts will reach 492,000 units. As labor market conditions slowly improve, lending standards gradually ease, foreclosures begin to subside and new home prices stabilize?EUR??,,????'?????<

The Portland Cement Association expects $9 billion will be spent on highway/streets projects in 2011 and $600 million in 2012. The composition of projects is expected to continue to move from resurfacing to more design intensive projects ?EUR??,,????'?????<

Nonresidential Outlook
Nonresidential construction is not expected to recover soon. Large declines that characterized 2009 have materialized in 2010. Further, smaller declines against weak 2010 levels are expected to characterize 2011. No substantive recovery is expected in 2012.

Public Outlook
The public sector outlook contains political as well as economic risks ?EUR??,,????'?????<

Economic Assumptions
No significant changes have been incorporated regarding discretionary state highway spending. Eroding state fiscal conditions account for the entire decline in highway cement consumption that has materialized since 2006. PCA estimates discretionary state street/highway cement consumption at 5.5 million metric tons in 2009. Total highway discretionary state cement consumption has declined by more than 12 million metric tons since 2006, accounting for 22% of the total industry?EUR??,,????'?????<

Discretionary state construction spending was hit hard during 2009. PCA estimates real discretionary state highway/road spending declined 4% in 2008 and another 12% in 2009. This reduction reflects not only fewer funds available for spending, but a shift in state spending priorities. During the 10 years preceding the economic downturn, state highway/road construction discretionary spending accounted for roughly 2.4% of total state expenditures.

Cutbacks in state discretionary highway/roads spending accounted for only 2.1% in 2008 and 1.9% in 2009.

Large state deficits are expected to continue in 2011, improving in 2012 with small surplus conditions materializing in 2013. Given the magnitude of the economic distress, deficit conditions could have been much worse had state governments not reacted quickly with expenditure cuts, including massive state construction cutbacks.