Are we moving toward a recession?
No, according to PCA chief economist Bill Toal—at least not this year. He remains convinced that economic growth will be about 1% for the first two quarters and about 2.8% for the entire year.
Toal believes that recession is unlikely because the economy remains in good shape in several areas:
- the Dow is still reflecting an acceptable market
- unemployment rose only 0.2% from December to January
- reported declines in construction spending are in comparison to last year's hot economy
What sets the concrete industry apart from other construction industries this year is spending on transportation under the Equity Act for the 21st Century (TEA-21) Bill enacted by Congress. Toal calls this spending, and the trickle-down effect it will generate, the concrete industry's trump card. Of all segments of the concrete industry, public spending will be the most significant. Nonresidential, which includes industrial and commercial construction, is concrete's next most-important market.
Housing is this year's least predictable market sector.
Within the concrete industry, Toal makes several predictions:
- Concrete wall construction, because of corporate downsizing, will remain flat or decline 5% for the next 1 to 2 years.
- Concrete floor construction will closely follow wall construction: flat to 5% lower than last year.
- Residential construction, which created 145,000 new jobs in January, will end the year with 0% to -5% growth.
- Decorative concrete is an unknown since, unfortunately, no records are kept for this growing market. But decorative work is likely to keep growing even in a declining economy since it's also part of the rehabilitation market, which traditionally increases during times of recession.
Regionally, areas with the highest population growth will experience continued growth, while the Midwest and Northeast will remain flat or decline slightly.
In spite of uncertainties, Toal is confident of his predictions. At a Federal Reserve meeting last fall in Chicago, his prediction of 2.8% growth was the lowest of all participants. For concrete construction companies and their suppliers, the best recommendation is to tighten your belts a little, explore those market areas where more money will be spent, and allocate more resources to marketing and securing work.