"Our outlook is not rosy," Portland Cement Association's (PCA) (Booth C4113) chief economist Ed Sullivan told attendees at PCA's "Cement Outlook: 2010-2014" press conference yesterday. According to Sullivan's economic forecast, even though cement consumption is expected to increase by 5.2% this year, this is merely a small shuffle up from an extremely depressed level.
"We're riding that bottom line," he said. As the U.S. economy enters its fourth year of decline, cement consumption is down 54,000 metric tons?second only to that of the Great Depression. Even though the industry will show slight gains each year, Sullivan warns that it will be a long 10-year recovery.
Those who were expecting to see relief last year with the American Recovery and Reinvestment Act (AARA) were disappointed. Bureaucratic delays in releasing funds coupled with long lags between outlays and construction activity for ARRA projects led to very little stimulatory impact on cement consumption in 2009.
But gains should come later this year as more projects go out to bid; Sullivan expects $22 billion in stimulus funds to be used in 2010/11.
"Look at the stimulus as a bridge," explained Sullivan. "Congress and the Obama administration knew that $800 billion wasn't enough?it was to bridge over economic uncertainties until we get to a time of job creation."
Unfortunately, the jobs aren't here yet. Typically, a recession goes on about 18 months before jobs appear again. This recession began in 2007. "We don't expect a job recovery like we did in 2001," said Sullivan. "We've cut too many jobs; we've cut into the bone. At the end of 2012, we still won't be at 2007 levels."
Sullivan reminded attendees that every cyclical downturn is temporary. "We'll come out of this."
In the meantime, it would be wise to keep an eye on regulatory efforts. Passing a new highway bill was put on hold in 2009 so Congress could focus on heath care legislation. But Sullivan said that could be a good thing. The bill, which could be the size of $500 billion, said Sullivan, can be talked about in terms of the unemployment rate."
When we are finally back on our feet, said Sullivan, we'll have a whole new dynamic that's facing us. Changing demographics may force a dramatic increase in long-term cement production, while at the same time emerging regulatory impacts may threaten to cut capacity: "Where are we going to get the supply for longetivity?"