In a state-by-state forecast, Portland Cement Association (PCA) Chief Economist Ed Sullivan predicts that the emerging weakness in residential construction will dissipate the strong growth recorded earlier in the year in many regional markets. "In July, 24 states showed significant declines in housing permit activity, including traditionally strong markets such as Nevada, Florida, and Arizona," Sullivan says. "I do not believe these declines will be temporary."
According to the Summer PCA forecast, Sullivan expects housing starts in 2006 to decline by 10.6 percent, followed by a similar decline in 2007. PCA’s most recent forecast points to high new home inventories, raising interest and inflation rates, and slower net job creation as contributing factors to an even greater residential slowdown. The decline in residential building was not unexpected. However, according to Sullivan, the nonresidential and public construction sectors are not experiencing the growth rate predicted earlier this year. "Underlying drivers for the nonresidential sector are improving, but at a slower rate," Sullivan says.
Year-to-date, U.S. cement use is up 5.6 percent compared with 2005 levels. PCA’s summer projections indicate that second-half weakness in residential construction will push the 2006 growth rate to 2.3 percent and to 1.2 percent in 2007.