Bureaucratic delays in releasing funds coupled with long lags between outlays and construction activity for American Recovery and Reinvestment Act (ARRA) projects will lead to very little stimulatory impact on cement consumption in 2009, according to the most recent economic forecast from the Portland Cement Association (PCA).
PCA expects total cement consumption to decline 22% during 2009 to 75 million metric tons. The meeting of total ARRA obligations in 2010 combined with the beginning of a sustained pick-up in the residential sector will contribute to a 10.9% increase in total cement consumption in 2010, followed by a 13.1% gain in 2011.
“The letting of ARRA dollars has been slower to develop than expected,” Edward Sullivan, PCA chief economist said. “A sustained and dramatic escalation of outlays must occur if a sizeable increase in highway construction is going to materialize in 2009.”
The public construction sector, which typically accounts for 50% of cement consumption, also is hampered by large state deficits caused by a perfect storm of adverse economic conditions and job layoffs, leading to declines in state tax revenue. Sullivan expects as jobs are created and consumer spending returns, public construction spending will rebound, but not until 2011.
“The residential sector has largely run its course as a significant cause of cement consumption declines and will start to be a strong contributor to growth in late 2010, early 2011. Nonresidential construction will continue to be a drag until then end of 2011,” Sullivan said.
