Despite recent economic news and activity suggesting a technical end to the "Great Recession," the conditions facing the construction industry likely will remain weak for another year or more, causing a drag on cement consumption, according to the most recent economic forecast from the Portland Cement Association (PCA), Skokie, Ill.

PCA anticipates 2009 will represent this recession’s trough for U.S. total cement consumption — reflecting a 26.6% decline from weak 2008 levels. A modest 5% increase will occur in 2010, with significant growth in consumption expected for 2011 and beyond.

“Given this weak outlook for private sector construction, any near-term turn in overall construction activity will be dictated by public construction,” says Edward Sullivan, PCA chief economist. “Unfortunately here state deficits are sterilizing the spending impacts of the federal economic stimulus plan.”

According to the Center on Budget and Policy Priorities, Washington, D.C., 33 states are in severe deficit positions for fiscal 2010, compared to 21 for fiscal 2009.

More than 90% of all highway and street spending is put in place by state and local governments. State fiscal conditions influence discretionary public construction spending, and the harsh economic environment facing state and local governments may result in a double-digit decline in discretionary highway/street spending during 2009, Sullivan says.

“Reductions in state spending coupled by the slow release of stimulus funds suggest the cement industry will see very little second half stimulatory impact during 2009,” he added. “However, more than 5 million tons of ARRA [American Recovery and Reinvestment Act] highway cement consumption should materialize in 2010 and 2011.”

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Source: Portland Cement Association