More than 100 people who attended THE CONCRETE PRODUCER Economic Summit at World of Concrete in January heard a mostly upbeat forecast for the construction and concrete industries.
“The engine for growth will be more subdued for 2007,” Ed Sullivan, chief economist for the Portland Cement Association, told the crowd. Sullivan forecasts U.S. gross domestic product of 2.6% for 2007 after a few years of 3.5-4% GDP growth. Sullivan called those past years “great times. As we go forward, conditions will not be that favorable, but they won't be that bad either.”
Presented by THE CONCRETE PRODUCER magazine and sponsored by Allen-Villere Partners, the two-hour luncheon program was the first event of its kind at World of Concrete. Pierre Villere, president of Allen-Villere Partners and TCP contributor, moderated the discussion.
Sullivan expects an 8% increase in nonresidential construction this year, on top of a 12% jump in 2006. There is still room for growth in this sector, as “we're nowhere near past cyclical peaks,” he said. Public construction, including new roads, bridges, and jails, will remain strong. But overall, he forecasts a 1.8% contraction in construction due to the housing slowdown.
Still, this year could mark a housing turnaround. “We should see consumers come back to the market in spring to purchase homes again,” said Jonathan Dienhart, director of published research at Hanley Wood Market Intelligence. “The inventory growth rate has peaked. That has to happen before things can get better.” New home cancellations also have peaked, mostly by investors and speculators. One piece of bad news: There still is a lot of new-home inventory to get through before building catches fire again.
Tavio Headley, economist with the American Trucking Association (ATA), had good news on the fuel front. Diesel fuel prices, the second biggest business expense for most companies after labor, had fallen to $2.43 a gallon in January, a 59-week low. This included a drop of 19 cents in just six weeks. Although this is good news, it's still far higher than the 10-year average of $1.59 per gallon.
Diesel prices have fallen because of a sharp drop in crude oil prices, and the mild winter in most of the United States has prompted refiners to manufacture more diesel fuel since heating oil supplies are high.
On the legislative front, Headley said ATA is seeking legislation to create a single diesel fuel standard. Currently, the need for various “boutique” fuels in various areas of the nation exacerbates local shortages. ATA also is seeking an increase in investments in refinery capacity.
Ed Luce, operations manager for Southern California Readymix, Vulcan Materials, warned of the need for more aggregate capacity. Developing new reserves is becoming more difficult. Aggregate must be shipped from farther away, causing the need for more effective rail and water transportation.
Associations in the Mix
ACI The American Concrete Institute's Strategic Development Council is hosting a two-day Concrete Summit on Sustainable Development, March 29–30, at the M Street Hotel in Washington D.C. Several speakers will provide their perspectives on sustainability—what it is, the role of the U.S. and international concrete industries, and what the green movement needs from the industry. Leaders and decision-makers from numerous facets of the industry are invited. For more, visit www.concretesdc.org.