Recently, the Portland Cement Association (PCA), Skokie, Ill., released its 2010 Spring Forecast Report. Reports released earlier this year have been less than enlightening. However, I had a feeling this report would be different—a fact that was confirmed when the first sentence read, “The economy is recovering.”
According to the PCA, cement consumption will see a 3 to 5 million metric ton increase in 2010 as compared to the depressed levels of 2009. Cement consumption has declined 54 million metric tons from its peak in 2005; the worst decline in history. The anticipated gains in 2010 are expected to materialize during the second half of 2010, according to the report, which also noted:
- GDP growth is expected to grow 2.75% in 2010, and 3.5% in 2011.
- Economic growth should generate 1 million jobs this year, 2 million in 2011, and more than 3 million in 2012.
- PCA expects an easing in lending standards, perhaps as early as 2011 following a stabilization of labor markets.
- The residential sector—both single-family and multifamily homes—is expected to become a modest contributor to cement consumption growth in 2010, the first growth since 2005.
- As for commercial construction, the picture isn't as pretty. Cement consumption for commercial reached a 38-year low in 2009, and an additional 30% decline in construction is expected concurrent with cement consumption declining another 29%. Commercial is expected to steady itself in 2011, followed by double-digit gains during 2012–2014.
- The American Recovery and Reinvestment Act projects will move from resurfacing to design intensive projects such as bridges with higher cement content.
Concurrent to the PCA forecast, FMI released its First Quarter 2010 report, which also recognizes GDP growth, the recovering stock market, and consumer and business spending. These positive indicators are just the first of many to resonate positively before impacting the construction industry. FMI reports 2010 construction will be down 5% after declining 13% in 2009 and also expects residential construction to begin a recovery. As for nonresidential construction, FMI reports a 16% decline in 2010 on the heels of a 9% decline in 2009. Again the commercial market is expected to struggle in 2010 before rebounding in 2011. Transportation and public safety construction will be the only segments to see growth in 2010. Nonbuilding construction will increase 4% in 2010 driven by power, conservation, and development construction. FMI also reports that the unemployment rate in the nonresidential construction market hovers around 27% after 31 consecutive months of job loss.
Have we turned a corner? Not quite, but we are getting closer. These variables must reflect positive and stable trends consistently before their impact begins to trickle down to the contractor. Until then, it's still a game of survival of the fittest.
Editor in Chief