Jan. 17, 2023 – Portland Cement Association’s (PCA) Chief Economist and Senior Vice President of Market Intelligence Ed Sullivan predicted a stronger U.S. economy during the first half of this year than was previously expected but believes there will likely be a slowdown in economic growth starting this summer.
“When looking at the big picture of real construction spending and cement consumption this year, we should expect both volumes to soften throughout the year, with significant declines in the second half of 2023,” Sullivan said during a presentation at this week’s World of Concrete show in Las Vegas attended by Rock Products Managing Editor Josephine Patterson. “The downturn is expected to be short-lived as interest rates ease slightly and stronger infrastructure volumes materialize in 2024 and beyond,” he said.
Sullivan explained that with the economy showing more near-term resilience, the Federal Reserve might be more aggressive with rate hikes. Given the timing lags associated with Fed actions, the economic fundamentals will eventually weaken. A recession, characterized by unemployment of 6%, is unlikely. “More an inflation-induced growth slowdown,” said Sullivan. He also predicted that construction in the private sector, which was down last year, is expected to take another tumble in 2023. However, strong order books may cushion cement consumption decline until the second half of this year.
In terms of new construction via the Bipartisan Infrastructure Law, Sullivan said it will likely be softer than many are expecting this year. Inflation, state construction spending reductions (sterilization), and typical spending patterns associated with allocations were cited as principal reasons.