Annual cement consumption is expected to climb by 2.6 percent during 2017 and 2.8 percent in 2018, according to new projections by the Portland Cement Association (PCA). The updated forecast adjusts downward PCA projections released earlier this year. Bad weather and lower anticipated budgets for the public construction sector are among the factors that have prompted the adoption of a more modest growth outlook.
“Once infrastructure and tax reform initiatives take hold and affect economic and construction activity, then we can expect growth in cement consumption to accelerate to higher levels,” said Ed Sullivan, PCA senior vice president and chief economist.
Sullivan noted the updated forecast assumes tax reform and a $250 billion national infrastructure program spearheaded by the Trump administration and Congress, but this now isn’t likely to begin until mid-2019. The dual fiscal stimuli will accelerate GDP growth, construction spending, and cement consumption. With unemployment expected to be even lower than today’s levels, these fiscal programs will add to inflationary pressures.
PCA also noted that rising inflation will necessitate a stronger Federal Reserve reaction and is expected to result in a rapid and perhaps larger-than-expected increase in interest rates.
“Construction is an interest sensitive sector and a slowdown and perhaps a decline in activity is expected beginning in late 2021,” Sullivan noted.
Revised Estimate Sees Impacts from Weather, Lower Public Construction Budgets for 2017-2018