Contractors serving the housing market are in the best position to weather 2021, according Ed Sullivan, Portland Cement Association senior vice president and chief economist.
While unemployment is up, Sullivan says that many of the demographic sectors that are buying homes are less affected. “Housing starts are expected to reach 1.3 million this year and 1.4 million next year,” Sullivan says, speaking in video remarks that outlined PCA’s fall forecast. “Among the three sectors—residential, nonresidential and public construction—housing will be the steadiest and strongest performer throughout the near term cycle.”
Consumer sentiment—which accounts for two-thirds of all economic activity—is hinging on how COVID-19 infections play out this year and next, Sullivan says.
“The longer this goes on, the more stress it puts on small business, which will be a fundamental ingredient in terms of the growth rate of the recovery,” Sullivan says.
This in turn is one of the many factors accelerating the decline of the nonresidential market, which is also being buffeted by vacancy rates and the growing reluctance of bankers to lend to commercial real estate. Sullivan says he doesn’t see these impacts unwinding until perhaps 2022.
“The largest cement consumption declines will occur in retail, hotel and office markets,” Sullivan says.
Public construction represents another area of risk. “There have been tremendous disruptions in state revenue collections,” Sullivan says. “It gets a little bit better next year, but it’s still bad.”
PCA forecasts cement consumption will see a modest decline in 2020 and 2021, lessening by 1.5 percent for the remainder of 2020 and 0.9 percent in 2021. This forecast is based on the weighted average of three economic scenarios, all assuming a significant increase in COVID-19 infections in the fourth quarter.