PCA’s Sullivan Projects Repeat of 2023 Construction Market Force Duel

Following the Federal Reserve’s recent signaling of a single 2024 interest rate cut, Portland Cement Association (PCA) Chief Economist Ed Sullivan sees a return this year of two forces – one exposed to, the other mostly shielded from borrowing costs – that shaped 2023 private and public construction activity.

High interest rates drove down residential and commercial building volume last year, countered by Infrastructure Investment & Jobs Act, Inflation Reduction Act and CHIPS Act-funded construction.

Addressing the 2024 IEEE-IAS/PCA Cement Industry Conference in Denver, Sullivan linked declines in interest rate-sensitive private residential and nonresidential building to a 2.5% drop in 2023 U.S. cement consumption – the first shipment decline in 13 years. While interest rates in the 6% to 7% range will continue to negatively impact private building segment work this year, he noted, escalating IIJA, IRA and CHIPS outlays should help the industry record a year-over-year cement consumption increase just above 1%.

“The 2024 outlook is simplified to the two forces,” Sullivan affirmed. “The edge this year is to non-interest rate-sensitive construction.”

Sullivan also expressed limited concern with U.S. Geological Survey figures showing a 5.5% decline in Q1 2024 cement consumption versus the same period last year. The beginning of the calendar is always the slowest for construction, he noted, allowing that a comparable falloff in Q2 or Q3 would be cause for concern.

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