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Connect With Concrete Construction Outlook: 2008 Ed Sullivan, Chief Economist PCA.

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Presentation on theme: "Connect With Concrete Construction Outlook: 2008 Ed Sullivan, Chief Economist PCA."— Presentation transcript:

1 Connect With Concrete Construction Outlook: 2008 Ed Sullivan, Chief Economist PCA

2 Connect With Concrete Introduction: Overview  The economy is in recession…and it may not be mild.  December  Fiscal & Policy actions will not avert a recession.  Timing lags  Fiscal Policy not have as strong an impact on GDP as expected.  Debt, Energy, Adverse Momentum. Lending aversion toward risk is spreading  Mortgage here  Consumer and Commercial impacts begins to emerge. Job losses compound economic adversities.

3 Connect With Concrete Key Questions  How deep will retrenchment go ?  How long will it last ?

4 Connect With Concrete Construction Outlook Billion 1996 $

5 Connect With Concrete Economic Outlook Slower Growth Ahead

6 Connect With Concrete Introduction  To determine the cause of a slowdown in economic Growth, or even a recession ….  …. Look no further than the excesses and imbalances created during the preceding boom period.  Debt played important role in growth.  Responsible debt?  Easy terms & standards  Unprecedented link in consumer spending to housing wealth.  Payback is tough – maybe more than consensus of economists believe.

7 Connect With Concrete Sub-Prime Mortgage Resets Total Loans Scheduled for Reset Period of Emerging Trouble

8 Connect With Concrete Lenders Reporting Tighter Lending Standards: Mortgages Easy Credit Period Tighter Credit Will Undermine Sales Recovery Sub-Prime Lending Has disappeared. Percent Reporting Tighter Lending Standards

9 Connect With Concrete Lenders Reporting Tighter Lending Standards: Consumer Easy Credit Period Credit Cards Sub-Prime Has Spilled into Consumer Credit Markets Percent Reporting Tighter Lending Standards Other Consumer Credit

10 Connect With Concrete Lenders Reporting Tighter Lending Standards: Commercial Easy Credit Period Small Firms Sub-Prime Has Spilled into Commercial Credit Markets Percent Reporting Tighter Lending Standards Medium to Large Firms

11 Connect With Concrete Sub-Prime is not just housing… Recession: May not be short or shallow. Housing Consumer Commercial Public Energy Foreign Capital Inflows

12 Connect With Concrete Economic Policy Actions Slower Growth Ahead

13 Connect With Concrete Monetary Policy Timing Lags Percent Change, GDP Growth Rate, Inflation 50 Basis Point Federal Funds Peak Economic Stimulus 8-9 Months After Cut Change in Real GDP Growth Rate Change in CPIU Inflation Rate

14 Connect With Concrete Fiscal Policy Impacts Per Month Percent Change, GDP Growth Rate Tax Rebate Planned Impact Tax Rebate Impact With PCA Debt Reduction Assessment

15 Connect With Concrete Economic Outlook: Policy Stimulus  Potential of significant policy impact does not arrive until second half  Ingredients of current economic malaise boil and fester undermining conditions until policy impacts arrive.  Fiscal Stimulus: $170 Billion …expected to encourage new consumer spending.  Pay debt – past consumption.  Monetary Policy: The issue is “Lenders risk aversion”….not interest rates & liquidity.  Loan losses, bank closures, sour economic news.  Gasoline …over $4 …partially offsets policy stimulus.

16 Connect With Concrete Economic Growth Outlook Percent Change, GDP Growth Rate Tax Rebate Bump

17 Connect With Concrete Residential Outlook Recovery Delayed: Q

18 Connect With Concrete Home Inventory Existing New Thousands of Homes for Sale, December New Existing New Existing Homes Account for 87% of Total Home Inventory Existing New

19 Connect With Concrete Single Family Price Trend: Existing Homes Compared to Year Ago Levels Percent Change, Year Ago (%) High Inventories Will Depress Prices Throughout Projected

20 Connect With Concrete Job Growth Projections Thousands of Net New Jobs Created Per Month History Forecast

21 Connect With Concrete Excess Home Inventory Inventory In Excess of Five Months Desired Supply More Than 2 Million Excess Inventories

22 Connect With Concrete Nonresidential Outlook Declines in 2008

23 Connect With Concrete Business Confidence Has Been Shaken Bullish Business Attitudes Percent of Firms Reporting a Positive Business Outlook, NAM Survey

24 Connect With Concrete Public Outlook Slower Growth in 2008, Problems Looming

25 Connect With Concrete District of Columbia No Shortfall 2010 Shortfall 2009 Shortfall States With Projected Budget Shortfalls

26 Connect With Concrete Conclusion Correction is Temporary

27 Connect With Concrete Take a Step Back  Cyclical correction is temporary.

28 Connect With Concrete Construction Outlook: 2008 Ed Sullivan, Chief Economist PCA


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