The Portland Cement Association (PCA) released its fall cement consumption forecast for the United States, which projects a near-term demand decline of 3.5% for 2023 – the first decline in 13 years.
Thankfully, the softening of consumption is expected to be short-lived, with growth returning in 2024 (4.3%) and beyond (2025, 3.6% and 2026, 3.8%).
“Due to inflation and rising interest rates, economic growth is expected to remain sluggish through mid-2023 with unemployment reaching 4.7%,” said Edward J. Sullivan, PCA chief economist and senior vice president. “Inflation is expected to remain high, leading to further monetary policy tightening through this year and into early next.”
Residential cement consumption accounted for nearly 80% of growth in the demand for cement in 2021. This year, rising mortgage rates coupled with double-digit gains in home prices has resulted in a weakening in housing starts – a nearly 13% decline is expected in 2023.
Nonresidential construction is also expected to weaken as several sectors have not recovered from Covid-induced downturns. “Easing economic conditions typically result in higher vacancy rates and soft leasing rates,” explained Sullivan. “In the context of net operating conditions expected for 2023, nonresidential construction will likely add to the declines originating from the residential sector.”
While the national infrastructure program will provide some relief in private sector construction, its near-term influence is likely to be modest given the time required between spending allocations and actual pouring of cement.
In 2024, PCA expects a modest recovery as interest rates begin to ease and more significant impact is felt from the infrastructure bill.
