PCA Chief Economist Ed Sullivan says recession ‘unlikely’
January 18, 2023
Leading economist in the cement, concrete and construction industries predicts a stronger U.S. economy during the first half of this year than was previously expected but believes there will likely be a slowdown in economic growth starting this summer.
Portland Cement Association’s (PCA) Chief Economist and Senior Vice President of Market Intelligence, Ed Sullivan, made the comments when presenting his economic forecast for the industries at the annual World of Concrete trade show.
Sullivan explained that with the economy showing more near-term resilience, the Federal Reserve might be more aggressive with rate hikes. Given the timing lags associated with Fed actions, the economic fundamentals will eventually weaken. A recession, characterized by unemployment of 6%, is unlikely.
Sullivan also predicted that construction in the private sector - which was down in 2022 - is expected to take another tumble in 2023. However, strong order books may cushion cement consumption decline until the second half of this year.
In terms of new construction via the Bipartisan Infrastructure Law, Mr. Sullivan said it will likely be softer than many are expecting this year. Inflation, state construction spending reductions (sterilization), and typical spending patterns associated with allocations were cited as principal reasons.
“When looking at the big picture of real construction spending and cement consumption this year, we should expect both volumes to soften throughout the year, with significant declines in the second half of 2023,” Sullivan said. “The downturn is expected to be short-lived as interest rates ease slightly and stronger infrastructure volumes materialize in 2024 and beyond.”
When the PCA issued its fall forecast in October, it predicted cement consumption to decline for the first time in 13 years, as the U.S. economy struggled against rampant inflation and resulting rising interest rates.
The forecast for the U.S. market projected a “near-term demand decline of 3.5%” for 2023. Growth was expected to return in 2024 and beyond, however.