Harsh Conditions in cement industry will persist through 2010

Although recent economic news and activity may suggest a technical end to the “Great Recession,” the conditions facing the construction industry are likely to remain weak for another year or more, causing a drag on cement consumption, according to the most recent economic forecast from the Portland Cement Association (PCA).

PCA expects 2009 will represent this recession’s trough for United States’ total cement consumption – reflecting a 26.6 percent decline from weak 2008 levels. A modest five percent increase will materialize in 2010, with significant growth in consumption expected for 2011 and beyond.

“Given this weak outlook for private sector construction, any near-term turn in overall construction activity will be dictated by public construction,” Edward Sullivan, PCA chief economist said. “Unfortunately here state deficits are sterilizing the spending impacts of the federal economic stimulus plan.”

According to the Center on Budget and Policy Priorities, 33 states are in severe deficit positions for fiscal 2010,compared to 21 for fiscal 2009.

More than 90 percent of all highway and street spending is put-in-place by state and local governments. State fiscal conditions influence discretionary public construction spending and the harsh economic environment facing state and local governments may result in a double-digit decline in discretionary highway/street spending during 2009, Sullivan said.

“Reductions in state spending coupled by the slow release of stimulus funds suggest the cement industry will see very little second half stimulatory impact during 2009. However, more than five million tons of ARRA highway cement consumption should materialize in 2010 and 2011.”