The on-going correction in residential construction is expected to drag down overall 2007 construction activity, according to the most recent forecast from the Economic Research department at the Portland Cement Association (PCA). PCA’s spring forecast by Chief Economist Ed Sullivan anticipates gradual gains throughout the second half of 2007, but not large enough to offset the year’s first half weaknesses. The increased construction activity that is expected to begin mid-year, however, will carryover to 2008, says Sullivan.
Gains in nonresidential and public construction, says Sullivan, will not be large enough to offset the harsh downward trends in the residential market. Sullivan’s 2007 projection reflects a nearly 6 million-metric-ton decline in residential cement consumption levels compared with 2006. "Single-family start activity and residential cement consumption will not recover until the existing inventory level of homes is reduced," he says.
Declines in construction are partially offset by rising cement intensity, the increasing use of cement and concrete in construction. Even with an overall decline in consumption, Sullivan sees a 1.5-percent increase in cement intensity in 2007. Cement intensity refers to the tons of cement per dollar of construction activity.
"Cement intensity is influenced by changes in the composition of construction, the regional composition of cement demand, and the competitive price position of concrete against competing materials," Sullivan says. "It is the relative price and changes in the composition of construction that will be key to intensity gains in 2007."
Source: Portland Cement Association