connect with concrete construction outlook: 2008 ed sullivan, chief economist pca

Connect With Concrete

Construction Outlook: 2008

Ed Sullivan, Chief Economist PCA


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.


Key Questions

How deep will retrenchment

go ?

How long will it last ?


Construction OutlookBillion 1996 $

450

500

550

600

650

700

750

800

1996 1998 2000 2002 2004 2006 2008 2010


Economic Outlook

Slower Growth Ahead


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 2003-2006 growth. Responsible debt? Easy terms & standards Unprecedented link in consumer spending to

housing wealth.

Payback is tough – maybe more than consensus of economists believe.


Sub-Prime Mortgage Resets

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Total Loans Scheduled for Reset

Period of Emerging Period of Emerging TroubleTrouble


Lenders Reporting Tighter Lending Standards: Mortgages

-20

-10

0

10

20

30

40

50

60

2000Q1 2002Q1 2004Q1 2006Q1 2008 Q1

Easy Credit Period

Tighter Credit Will Undermine Sales Recovery

Sub-Prime Lending Has disappeared.

Percent Reporting Tighter Lending Standards


Lenders Reporting Tighter Lending Standards: Consumer

-15

-10

-5

0

5

10

15

20

25

30

35

2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008 Q1

Easy Credit Period

Credit CardsSub-Prime Has Spilled into Consumer Credit Markets


Other Consumer Credit


Lenders Reporting Tighter Lending Standards: Commercial

-30

-20

-10

0

10

20

30

40

2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008 Q1

Easy Credit Period

Small Firms

Sub-Prime Has Spilled into Commercial Credit Markets


Medium to Large Firms


Sub-Prime is not just housing… Recession: May not be short or

shallow.

Housing

Consumer

Commercial

Public

2007

2009

2008

2006

Energy

Foreign Capital Inflows


Economic Policy Actions

Slower Growth Ahead


Monetary Policy Timing LagsPercent Change, GDP Growth Rate, Inflation

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0 2 4 6 8 10 12 14 16 18 20 22 24

50 Basis Point Federal Funds Peak Economic Stimulus 8-9 Months After Cut

Change in Real GDP Growth

Rate

Change in CPIU Inflation Rate


Fiscal Policy Impacts Per MonthPercent Change, GDP Growth Rate

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

May July September November January March

Tax Rebate Planned Impact

Tax Rebate Impact With PCA Debt Reduction

Assessment


Economic Outlook: Policy Stimulus

Potential of significant policy impact does not arrive until second half 2008.

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.


Economic Growth OutlookPercent Change, GDP Growth Rate

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2005.1 2006.1 2007.1 2008.1 2009.1 2010.1

Tax Rebate Bump


Residential Outlook

Recovery Delayed: 2009 3Q


Home Inventory

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2004 2005 2006 2007 2008 2009

Existing

New

Thousands of Homes for Sale, December

NewExisting

Existing

Existing

New

New

Existing Homes Account for 87% of Total Home

Inventory

Existing

Existing

New

New

Connect With ConcreteSingle Family Price Trend: Existing Homes Compared to Year Ago Levels

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

2004 2005 2006 2007 2008 2009

0

2

4

6

8

10

12

Percent Change, Year Ago (%)

High Inventories Will Depress Prices Throughout 2008.

Projected


Job Growth ProjectionsThousands of Net New Jobs Created Per Month

-200.0

-100.0

0.0

100.0

200.0

300.0

400.0

2004 2005 2006 2007 2008 2009

History Forecast


Excess Home Inventory

-1000

-500

0

500

1000

1500

2000

2500

2004 2005 2006 2007 2008 2009

Inventory In Excess of Five Months Desired Supply

More Than 2 Million Excess Inventories


Nonresidential Outlook

Declines in 2008


Business Confidence Has Been Shaken

0

20

40

60

80

100

120

2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008 Q1

Bullish Business Attitudes

Percent of Firms Reporting a Positive Business Outlook, NAM Survey


Public Outlook

Slower Growth in 2008, Problems Looming


District of Columbia

No Shortfall 2010 Shortfall2009 Shortfall

States With Projected Budget Shortfalls


Conclusion

Correction is Temporary


Take a Step Back

Cyclical correction is

temporary.


Construction Outlook: 2008

Ed Sullivan, Chief Economist PCA

connect with concrete construction outlook: 2008 ed sullivan, chief economist pca

Documents

consumer credit slide

concrete lenders

concrete introduction

concrete fiscal policy

economic growth

concrete construction

cpiu inflation rate

concrete key questions