Portland Cement Association forecasts an increase in cement consumption.
Avoiding the fiscal cliff provided a basis for the Portland Cement Association (PCA), Skokie, Ill., to increase its forecast for construction activity in the United States in 2013.
“PCA has upwardly revised its projections for the economy, construction activity, and cement consumption for 2013,” the trade group announced on its website in January. “The upward revisions reflect adjustments made to our forecast in light of the recent fiscal cliff accord. According to this scenario, the near-term disruptive economic aspects associated with the fiscal cliff are significantly reduced. According to PCA's new assessment, cement consumption is expected to grow at rates consistent with 2012 levels—perhaps stronger.”
In a Jan. 18 news release expanding on the forecast of its Chief Economist Ed Sullivan, the PCA said, “Improving underlying economic fundamentals, the existence of large pent-up demand balances and the diminishment of economic fiscal cliff uncertainty will combine to result in strong growth rates in 2013 and an increase in cement consumption.”
The revised forecast from the PCA predicts an 8.1 percent growth in cement consumption in 2013, significantly higher than the tepid growth projected in its fall 2012 report. The upward revisions, which imply a similar boost in concrete production, reflect “adjustments made in light of the fiscal cliff accord, recognition of stronger economic momentum, and markedly more optimistic assessments regarding residential construction activity,” says the PCA.
The January report also referred to 2012 cement consumption in the U.S. at 78.5 million metric tons, up 8.9 percent compared to 2011.
“Growth in 2013 cement consumption will be largely driven by gains in residential construction,” says Sullivan. “Housing starts should reach nearly 950,000 units, with single-family construction near 700,000 starts during 2013. We see starts hitting the 1 million mark in 2014 or 2015.”
But the party is not quite ready to start, Sullivan cautions, adding that the first quarter of 2013 would actually show declines compared to the same period in 2012. “It is important to point out that this potential decline in first quarter growth rates does not signal a weakening in market fundamentals, but rather a hangover from favorable 2012 weather conditions. Stronger gains in cement consumption growth are expected during the second quarter.”
The accelerated consumption predicted during the second half of 2013 should carry into the following year. PCA projects an increase in cement consumption of 8.3 percent for 2014.
The Associated General Contractors (AGC), Arlington, Va., also sees activity increasing in 2013 relative to 2012.
“Significantly more construction firms are planning to add new staff than plan to cut staff, while demand for many types of private sector construction projects should increase [in 2013],” states the AGC, based on results of a survey of its members.
AGC says the survey results “provide a generally optimistic outlook for the year even as firms worry about rising costs and declining public sector demand for construction.”
“While the outlook for the construction industry appears to be heading in the right direction for 2013, many firms are still grappling with significant economic headwinds,” says Stephen E. Sandherr, the association’s CEO. “With luck and a lot of work, the hard-hit construction industry should be larger, healthier, more technologically savvy and more profitable by the end of 2013 than it is today.”
Sandherr says 31 percent of the firms surveyed plan to add staff in 2013, while only 9 percent plan to make layoffs this year. Among the 30 states with large enough survey sample sizes, 56 percent of firms in Maryland plan to hire new staff this year, more than in any other state. Only 14 percent of firms in South Carolina plan to add staff this year, the least amount in any state.
Meanwhile, 37 percent of firms in Michigan plan layoffs for this year, the highest percentage of any state. No firms working in Maryland reported plans to make layoffs this year. (Those interested in the AGC’s state-by-state survey results can click here.)
Contractors appear most optimistic about the outlook for hospital and higher education construction, says Sandherr, noting that 36 percent of firms predict the amount of money spent on those projects will grow in 2013 while 39 percent of firms expect the market will remain stable compared to last year. Contractors were also optimistic about the markets for power construction, but had lower expectations for manufacturing; private office and retail, warehouse and lodging construction.
However, not all the news is good. Contractors expect demand for many types of public construction will decline in 2013: 40 percent of contractors report they expect demand for public buildings to shrink in 2013 while only 18 percent expect that market to grow. As well, 37 percent of contractors surveyed expect demand for K-12 school construction to shrink while only 20 percent expect activity in that sector to increase. And 35 percent of contractors expect the market for manufacturing facilities to shrink this year, while only 23 percent predict it will expand.
And access to credit remains a barrier in some cases. “A significant – but smaller than last year – number of contractors report that customers’ projects have been delayed or cancelled because of tight credit conditions,” says AGC, adding that 40 percent of responding firms report tighter lending conditions have forced one or more of their customers to delay or cancel construction projects. “Only 3 percent of firms reported having an easier time getting credit while 41 percent report no change in credit conditions,” says the AGC.