By Nick Gilbert
The Portland Cement Association (PCA) predicts that the estimated cement consumption will almost double for the year, thanks to strong gains in cement intensities, gains in residential and commercial construction activities, and favorable weather conditions in the first half of 2012.
PCA adjusted its spring outlook upward, expecting a 6.9% rise in 2012 when compared to the 2011 levels. It also anticipates a 5.8% increase in 2013 and a 10.9% jump in 2014. Changes in cement intensity and construction activity will be the key drivers to increase cement consumption.
Cement intensity is the quantity of cement utilized per actual dollar of construction activity. Since cement consumption is very high at the initial stages of a construction project, PCA predicts that the decline in construction starts was accountable for approximately 75% of the cement declines in the economic downturn.
Ed Sullivan, Chief Economist at PCA, stated that besides having favorable construction weather in the first of 2012, actual put-in-place construction activity has increased 4.2% when compared to the 2011 levels. The organization anticipates a 5.5% gain on actual construction activity in 2012 after having witnessed decline for the past seven consecutive years. However, uncertainty will define the short-term economic forecast and hinder robust growth conditions from materializing.
For instance, based on earlier forecasts, creating jobs is the key element to revival and crucial to mend the structural challenges currently faced by the construction market. A steady deterioration of business and consumer confidence due to the awaiting 2013 ‘fiscal cliff’ can severely impact this.
Under existing law, rising taxes and declining spending will drastically decrease the federal budget deficit between 2012 and 2013. This development is referred as ‘fiscal cliff’ by some observers. Sullivan explained that if Congress does not succeed in tackling the ‘fiscal cliff’ challenge in Q1 and Q2 of 2013, then adverse economic consequences may occur, which in turn could hamper the revival process and affect cement consumption in 2013. PCA's baseline projections presume a 'rational' Congress, which will identify these adverse effects and take necessary actions for economic growth.