A new forecast from the Portland Cement Association (PCA) nearly doubles the expected increase in cement consumption for the year, attributing the boost to both changes in construction activity and the projected amount of cement used in future projects. Favorable weather conditions during the first half of 2012 was also a key contributor.
PCA revised its spring forecast upward, anticipating a 6.9% increase in 2012 from 2011 levels, followed by a 5.8% jump in 2013 and a double-digit increase of 10.9% increase in 2014.
“In addition to great construction weather during the first half of the year, real put-in-place construction activity is up 4.2% compared to 2011 levels,” said Ed Sullivan, PCA chief economist. “We expect to see a 5.5% gain on real construction activity this year– after seven consecutive years of decline.”
But Sullivan warned that uncertainty will characterize the near-term economic outlook beyond 2012 and inhibit stronger growth conditions from materializing.
For example, as with previous forecasts, job creation is the critical ingredient to recovery and key to healing the structural difficulties that currently face the construction market. An erosion of consumer and business confidence can adversely affect this, Sullivan said. Under current law, increases in taxes and, to a lesser extent, reductions in spending will reduce the federal budget deficit dramatically between 2012 and 2013—a development that some observers have referred to as a “fiscal cliff.”
“If Congress fails to address the ‘fiscal cliff’ issue during the first or second quarter of 2013, there is the potential for severe adverse economic consequences that could slow the recovery process, potentially leading to a severe decline in 2013 cement consumption,” Sullivan said. “PCA’s baseline projections assume a ‘rational’ Congress that will recognize these risks and take action to minimize restraints on economic growth.”