The economy will continue to remain steadily apace, interest rates will stabilize and possibly as early as sometime next year, look for another broad economic expansion that will be a boon to construction aggregates, according to the latest edition of The Pulse, the quarterly economic report from Allen-Villere Partners and Rock Products.
The Pulse is the construction-materials industry’s premier economic report, focusing on the most current data points; aggregates and ready mix concrete demand; and insightful market analysis.
“The last quarter shows more of the same, and the construction trends continue to be steady with the AVP Pulse Index maintaining a very tight range,” stated Pierre Villere of Allen-Villere Partners, the lead author of the report. “While the Index is down 1.1% from the prior quarter, it is still up a robust 7.1% year-over-year. A big driver of the movement last quarter was the run-up in Industry Stock Prices, which have all seen a pullback this quarter amidst the expected profit-taking after posting 52 -week highs. However, they are all still up a whopping 41.2% as a group, but the pullback has acted as a downdraft on our formula for calculating the Index.
“A positive impact on the Index came from new housing market activity; Case Shiller was up 0.9%, and housing starts are still up 3.9% despite 7% mortgage rates that are weighing heavily on homebuyer demand.” Villere continued. “But there are still some possible risks to the construction industry and its corresponding impact on construction aggregate demand. The current UAW strike is an unknown, and of course the concern that the Fed will over-tighten and stall the economy is still a possibility, but I am not betting on any of that happening.
“To summarize the longer view, I’ll say again what I have said since the beginning of the interest rate hikes: no recession,” Villere concluded. “I have not wavered from that view, and barring a ‘Black Swan’ event that no-one currently sees coming, the economy will continue to remain steadily apace. And I’ll repeat what I said last quarter, because nothing has changed our outlook: when interest rates stabilize and cuts start taking place, it will be because inflation is tamed. I still think that is possibly as early as sometime next year, but regardless of timing, get ready for another broad economic expansion that will be a boon to construction aggregates. The only moderation to my view is the Black Swan event of the Silicon Valley and Signature Bank failures, which spooked financial markets that are still too gun-shy just 10 short years since the end of the Great Recession. This is the time for Jay Powell and his Federal Reserve to shine, and balance his inflation fight against the tumult that higher interest rates are driving.”
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