Summer Cement Outlook

Transcription

1 Contact: Ed Sullivan, SVP & Chief Economist, (847) , September 2016 Summer Cement Outlook Introduction PCA has made only minor adjustments to its spring cement projections for 2016 and In the context of sustained albeit slow economic growth, construction spending is expected to grow at roughly 4% annually during the forecast horizon. This reflects moderate growth in residential spending, and somewhat slower growth in nonresidential and public construction activity. These gains coupled with modest gains in cement intensities translate into annual cement consumption growth of roughly 4% annually. These projections are made in the context of recent data offering insight into the economy that is conflicting. Despite the mixed evidence, PCA s macroeconomic outlook remains intact. The current underlying economic fundamentals are solid. Despite the volatility in United States economic growth over the past several years, the labor market has consistently expanded at a rate near 200,000 net new jobs monthly. The unemployment rate has dipped below 5%. While the pace of job creation is expected to slow, it is expected to remain strong enough to insure sustained growth. PCA expects real GDP will grow 1.5% in 2016, 2.2% in 2017, and slightly stronger in the out years. According to our scenario, real GDP never breaks 3% on a full year basis during the forecast horizon.

2 Weak investment spending and inventory draws have helped to keep the real GDP growth rate low during the past several quarters. A strong dollar and international headwinds also contribute to the anemic growth rates. These headwinds that have plagued recent quarters of economic activity are expected to remain in play but are expected to diminish in strength. The dollar s strength, coupled with some slack in the economy, suggests inflation rates will remain below the Federal Reserve s target of 2% at least through In turn, this suggests that the Federal Reserve will proceed very slowly in tightening monetary policy. PCA assumes two 25 basis point federal funds rates hike during As inflationary pressure builds in 2018 and beyond, a slightly stronger tightening is expected to unfold. This implies a favorable interest rate outlook will further support construction activity at least for the next two years. Continued and sustained increases in cement consumption will create additional pressures on supply. Capacity utilization, now running near 80% utilization, is expected to increase slowly. Most of the additional supply volume needed to match consumption is expected to come via imports. This reflects the ample availability of clinker world-wide, a strong dollar, and low dry-bulk freight rates all translating into low landed import costs. Economic Outlook The recent data offering insight into the economy is conflicting. Consumer sentiment, for example, most recently recorded a gain. Consumer confidence a decline. New single family sales recorded a very strong gain. Existing home sales recorded a decline. Three months ago the labor market recorded 37,000 net new jobs created in March an obvious harbinger of weakness. One month ago, 287,000 net new jobs were created an obvious harbinger of an economy ready to overheat. Conflicting data, such as these, while generally positive is evidence of an economy struggling to achieve a more vibrant lift-off. Despite the mixed evidence, PCA s macroeconomic outlook remains intact. The current economic fundamentals are solid. Despite the volatility in United States economic growth over the past several years, the labor market has consistently expanded at a rate near 200,000 net new jobs monthly. The 2

3 unemployment rate has dipped below 5%. Job growth has enabled the economy to rebalance itself after a long and deep recession. While the pace of job creation is expected to slow, it is expected to remain strong enough to insure sustained growth. Hiring strength in the context of already low unemployment rates suggests that the gradual strengthening in wage growth that has materialized during 2016 will continue. This, coupled with low consumer debt burdens as a percent of household income suggests the ability of consumer spending to growth at rates consistent with 3% or more. Drags on investment spending arising from energy price declines and inventory bloat are expected to become less of a drag going forward as oil prices rise and the inventory-to-sale ratios improve. These drags are not expected to be eliminated, but the adverse impact will lessen in subsequent quarters. Finally, government spending activity is expected to remain a modest contributor to economic growth going forward. Stronger labor markets imply stronger receipts in state income and sales taxes. User fees will supplement these gains. Sustained gains in home prices suggest increases in the revenue streams facing localities that rely heavily on property taxes. Recently, global headwinds have lessened but still resulted in weakened opportunities for United States export growth. Weaker world economic growth implies a lessening in demand growth for commodities such as oil. These demand conditions subtract from growth in economies engaged in the production of raw materials including the United States with its fracking explosion. These adversities to global growth are mounting. Debt positions accumulated over the past several years could become exposed in the context of a global growth slowdown and could possibly add to downward momentum. While growth going forward will be largely driven by growth in consumer spending, investment spending and to a lesser degree state and local government spending will offset persistent drags on economic growth of federal government spending and an expanding trade deficit. Growth rates, compared to past recoveries, are expected to remain subdued. 3

4 In the context of a strong dollar and underutilized capacity, inflation is expected to remain below Federal Reserve targets at least through Interest rates as a result, are expected to remain low despite the Federal Reserve s policy of modest monetary tightening. PCA assumes two 25 basis point federal funds rates hike during As inflationary pressure builds in 2018 and beyond, a slightly stronger tightening is expected to unfold. This implies a favorable interest rate outlook will further support construction activity at least for the next two years. Housing Outlook Slow steady economic growth suggests that housing starts will record moderate sustained percentage gains throughout the forecast horizon. These percentage gains, averaging 6.7% annually throughout the forecast horizon, may mislead some into thinking our residential forecast is optimistic. It is not. Housing starts declined from 2.1 million starts in 2005 to 552,000 in Since then housing starts have averaged a 12.6% annual growth rate and 2015 levels stand at 1.1 million starts, or 47% below past peak levels. Sustained gains of 6% to 7% placed atop of 6% to 7% gains, year-in and year out must be placed in context of the depths from which the housing market is recovering. At the end of the forecast horizon, housing starts are expected to reach 1.6 million starts still well below the past housing boom peak in A rough cross-check supports this level of starts activity. Two million jobs created annually translates into roughly 900,000 new households. Each year 350,000 to 375,000 housing units are demolished and must be replaced. In addition, estimates of 250,000 to 400,000 second homes, or vacation homes, are built each year. An argument could be made that the aging of the baby boomers supports the higher number of vacation homes. In any case, these rough cross-checks translate into starts activity in the range of 1.5 to 1.7 million units. Arguments suggesting these volumes are inflated by the assumptions used to estimate household formation, demolition rates, and second home demand must deal with the fact that these estimates do not take into consideration more than 4.0 million units of pent-up housing demand that has been generated (and continues to be generated) during the recession and snail s pace housing recovery. 4

5 While the eventual settling to a level of 1.5 to 1.7 million starts may be conservative in light of pent-up demand, it is the pace and path of recovery that separates most construction economists projections. PCA attempts to integrate conservatism into our forecast projections. Our aim is that risk and market surprises are targeted on the upside. The pace of PCA s housing recovery appears to be slower and diverges from consensus as the forecast progresses in years. The clear question is; Why? Several key assessments are included in PCA s housing outlook including: 1) cyclical affordability factors, 2) access to capital in the mortgage market, 3) demographics, and 4) supply side issues relating to skilled labor and lot availability. Consider the following. Affordability Factors: The underlying cyclical fundamentals supporting residential construction reflect low mortgage rates and moderate increases in the price of homes. Average new home monthly payments reach a peak in 2006 at slightly more than $1,690. As mortgage rates declined, home prices collapsed pushing the average new home monthly payment to roughly $1,100 or a 35% decline. The economic recovery eventually leads to a reversal in trends regarding monthly payments. Mortgage rates, thus far, have slid sideways and are expected to continue that trend through Home prices are rising faster than inflation reflecting in part supply constraints and inventory shortfalls. All totaled, the average new home monthly payment is estimated at a level just below $1,400 per month. While this represents a 27% increase from recession lows, it also represents a level 17% below the 2006 peak level. Despite sustained increases in monthly payments during the past few years, household income has kept pace and overall affordability levels that compare monthly payments against household income remain favorable and are expected to remain so through As inflationary pressures begin to mount and exceed the 2% Federal Reserve target rate for inflation, more aggressive interest rates are anticipated. These actions, coupled with higher inflationary expectations, will impact mortgage rates. The flatness of mortgage rates that have characterized the housing market since are expected to show sustained increases beginning in mid-to-late 2017 and beyond. While wage gains are also expected to show more strength, in net an erosion in new home affordability is expected to materialize in 2018 and beyond. Mortgage Access: While the potential for an erosion in new home affordability exists in the longer term, for now affordability levels remain favorable. Outright affordability levels, however, do not capture the entirety of cyclical dynamics. The ease in the ability to qualify for mortgages can have a huge impact on the ability to purchase a new home. Clearly, easy credit terms and risk acceptance significantly contributed to the demise of the sub-prime market, a collapse in the housing market, and the great recession. In its wake, regulators applied new standards and rules to curb lending risks and avoid a repeat of the collapse. Access to credit, including mortgages, became extremely difficult. Qualifying FICA scores increased. Cash purchases, and thereby avoiding the mortgage market, accounted for as many as 33% of all purchases. The pendulum of easy access to credit markets was replaced by extreme difficulty in gaining access no doubt partially explaining the slow recovery in home sales. According to the Federal Reserve s Survey of Bank Lending Officers, lending restrictions have eased during the past several years and is no longer overly restrictive. FICA scores to qualify for a mortgage have declined slightly. The methodology for calculating FICA scores has also changed to the benefit of borrowers. All this suggests that access to credit has improved during the last several years. Quarterly trends of the Senior Loan Officer Survey suggests that further easing in mortgage standards may have run its course. While further easing in mortgage loan standards is not expected, sustained growth in overall economic activity resulting in 2 million net new jobs annually and stronger wage gains suggests that the average FICA score will improve throughout the forecast horizon and implies that more potential home buyers will qualify even in the context of tight lending standards. In addition, typically a foreclosure limits a borrowers ability to secure a new mortgage for seven years. Many foreclosures materialized during the 5

6 borrowers ability to secure a new mortgage for seven years. Many foreclosures materialized during the early stages of the recession This implies that some of these potential homebuyers that are now excluded from the mortgage market may re-enter as the forecast horizon wears on. Demographics: Household formation has not increased in proportion to job creation. According to the 2013 Current Population Survey data, the share of year-olds also known as Millennials living with their parents increased from around 27% before the housing crisis to 31%, where it remained in Of those living with their parents, 44% of year-olds were unemployed, while 25% held a job. This may be explained by the existence of overwhelming student debt levels, poor career job opportunities, and harsh lending standards. Presumably, this adverse phenomenon will work itself out as the job market continues to gain strength. PCA believes the millennials household formation and homeownership pattern play a key role in slower than expected starts activity recovery. To the extent this phenomenon remains a characteristic in the market, the improvement in housing starts will underperform expectations based purely on the cyclical fundamentals. Supply Constraints: Supply constraints may also be playing a role in hindering a faster recovery in housing starts. Nationwide, the Associated General Contractors of America surveyed 1,400 construction contractors. The national survey said 86 percent of firms report trouble filling available positions, up from 83 percent in 2014 and 81 percent in PCA attempts to quantify the impact of labor shortages on single family construction activity. If labor shortages exist, they will manifest themselves in the marketplace. Typically, homebuilders target five to six month s supply of new homes on the market. Month s supply has been running well below those levels. Admittedly, many factors could be responsible for this unwanted under building from target. If labor shortages are responsible for the under building, then the difference between desired target and actual multiplied by the prevailing selling rates translates into the magnitude that labor shortages have on single family starts activity. Depending on the target level, this calculation suggests that labor shortages may have contributed to as many as 75,000 to 125,000 un-built single family homes. 6

7 Finally, PCA s latest forecast also places more emphasis on multifamily starts. When household formation occurs as a result of a stronger labor market, it is then split between a household living in a single family home or living in a multifamily. Credit conditions facing first-time home buyers, damaged credit and weighty student loan obligations, all work to strengthen multifamily projections. As a result, PCA has increased the composition of housing starts in favor of multifamily. Strong multifamily construction is expected to persist throughout the forecast horizon. PCA concedes that the mix of housing starts may actually be even more tipped in favor of multifamily starts than reflected in our current projections. Since less cement is consumed per multifamily start compared to a single family start, this assessment suggests downside risk to our forecast estimate. Nonresidential Outlook Nonresidential construction gains are expected to be driven by growth in the expected return on investment (ROI) for commercial properties. ROI, according to the PCA model, has two essential components including net operating income (NOI) and asset appreciation potential. Between the two, PCA believes NOI is the more important metric to focus on this early in the recovery. It s strengthening will play an increasingly important role in determining asset appreciation in the years ahead influencing total ROI. To this end, nonresidential NOI is tied to job creation. Job creation, either directly or indirectly, translates into higher occupancy and leasing rates. Such growth translates into stronger net operating income for nonresidential properties. As NOI increases, property values strengthen. With the strengthening in property values, lending risk declines, and access to credit becomes more available. The combination of improved NOI, increases in property values, and more available credit sets the stage for a commercial construction expansion. The rate of improvement will vary widely among regions in the United States. The tie in of labor market conditions as a key influence on commercial properties net operating income or as an indirect indicator of health is existent for most commercial subsectors of nonresidential construction. Slower job growth will impact the underlying conditions influencing commercial building construction. The 7

8 transmission mechanism from job gains to increased construction activity often goes through many intermediary steps, and each stage of the process can take a good deal of time. Similarly, the winding down in job market growth must go through the same process before it shows a significant impact on nonresidential construction. As a result, PCA believes that as job growth slows, the impacts on nonresidential will be gradual. There is a much quicker reaction under a scenario of outright job reduction. PCA expects the double digit growth rate in real nonresidential spending that has persisted for the past two years will slow to less than 5%in 2016 and settle to a 3.0%-3.5% annual growth rate for the remainder of the forecast horizon. This growth is expected in the context of sustained economic growth and an expanding labor market and will result in rising occupancy rates. This rise in occupancy rates will result in stronger leasing rates leading to sustained gains in net operating incomes. A sustained economic recovery paints a picture to lenders of stability and growth. Access to capital is expected to ease. Not only will such a phenomenon support nonresidential spending levels, it will act to promote increases in nonresidential property values enhancing the overall outlook for ROI on nonresidential investments. While an argument can be made that the nonresidential recovery has peaked in some regions, it has not peaked in other regions. The potential of strong nonresidential construction growth rates in these areas suggests that the national nonresidential spending growth rate will ease but may remain at moderate growth levels. It also suggests a disparity in overall growth rates among states and partially accounts for differences in overall cement consumption growth rates. Public Outlook On the public side, sustained growth reflects an annual expansion in employment in excess of 2 million net new jobs. At the state and local level, the translation is simple. More workers imply more income tax revenues, and greater spending levels result in stronger sales tax revenues, and property taxes increase with rising real estate values. State and local revenues are expected to expand on a sustained basis. This increase in revenues will lead to increases in state and local spending, increasing spending on construction projects. Keep in mind, state and local spending accounts for 60% of total government spending and more than 90% of total public construction spending. These conditions, therefore, support sustained gains in public spending. Federal public construction spending is also expected to be mildly supportive of growth during the outlook horizon. The dynamics going forward change. As the economy s momentum slows, and job creation softens slightly, states ability to spend will continue to expand, but eventually ratchet down to a slightly slower growth pace. At the same time as a slightly slower economic growth pace settles in place, the new highway bill will exert an increasingly positive contributor to growth. In the fall forecast, PCA did not have the new highway bill included into its calculations. The Construction to Cement Link: Cement Intensities Changes in cement consumption are dictated by changes in construction activity and changes in cement intensity both contribute to growth in cement consumption. Cement intensity measures the amount of cement used per real dollar of construction activity. During the recession, cement intensities declined 24% with the largest declines occurring in the nonresidential construction segments which declined 54%. Along with the recovery in the economy and construction spending, a recovery in cement intensities was also anticipated. During the last three years, cement intensity grew at an average of 4.5% annually adding that directly to cement consumption growth rates. Further gains were anticipated for 2015 and beyond achieving roughly 80% of pre-recession levels. Instead, cement intensities endured a setback in 2015 declining 4% and reducing total cement consumption growth rates by an equal amount. 8

9 Many factors impact changes in cement intensity. Key influencers are: changes in the composition and type of construction, changes in the regional composition of cement demand, changes in the competitive price position of concrete against competing materials, and usage of supplementary cementitious materials (SCM), and the proportion of starts to total construction activity. While data revisions could significantly change conclusions, PCA believes the decline in oil exploration and the decline in starts activity as a proportion of total construction accounted for the largest of the total declines. Increased SCM usage also contributed to the decline. PCA has moderated its growth path going forward and now expects cement intensity levels will reach roughly 75% of pre-recession levels. Conclusion Cement consumption is expected to grow 3.9% in 2016 and 4.2% in Import levels increased 34% in 2015, or by 2.9 million metric tons. Continued gains in imports are expected to occur in the context of a strong dollar and low dry-bulk freight rates. Both conditions are expected to continue at least for the next two years. This implies that imports attractiveness as a source of cheap supply may continue in the near term. Import volumes are expected to increase, pushing import share to 20% by the end of the forecast horizon. 9

10 U.S. Forecast Tables August 31, 2016 Source: Portland Cement Association s Market Intelligence Group based on publicly available sources believed to be reliable; however, accuracy cannot be guaranteed. The Portland Cement Association assumes no legal responsibility for the outcome of decisions or commitments made on the basis of this information. Reproduction or redistribution without authorization of the Portland Cement Association is prohibited Portland Cement Association

11 United States Forecast Summer 2016 Economic Forecast General Economic Factors - Real GDP Growth (%) 2.4% 2.4% 1.5% 2.2% 2.4% 2.5% 2.5% 2.4% - Unemployment Rate (%) 6.2% 5.3% 4.9% 4.8% 5.0% 5.0% 5.1% 5.1% - Employment 140, , , , , , , ,284 - Change in Employment 3,116 2,545 2,261 2,205 2,270 2,190 2,121 2,100 - Inflation Rate (%) 1.6% 0.1% 1.0% 1.9% 2.2% 2.4% 2.4% 2.3% - Consumer Sentiment Index (Year End) Total Housing Starts (000) 1,002 1,106 1,185 1,262 1,338 1,431 1,530 1,629 - Oil Price, WTI Per Barrel $93.17 $48.67 $41.16 $51.58 $55.00 $64.31 $71.31 $ Note: Oil Rig Count 1, , , ,321.0 Key Interest Rates - Mortgage Rate - 30 Yr Fixed (%) Federal Funds Rate (%) Three Year Treasury (%) BAA Bond (%) Implied Corporate Risk Premium Key Single Family Factors - Single Family Starts (000) ,034 1,128 1,221 - Average New Home Sq Footage 2,542 2,575 2,611 2,629 2,614 2,594 2,569 2,569 - Total Single Family Sq Footage (Million) 1,642 1,833 2,070 2,284 2,467 2,682 2,897 3,136 - Average Cement Tons Per Start Mortgage Rate - 30 Yr Fixed Median Home Price (000) $283.9 $296.0 $306.7 $317.4 $328.8 $340.0 $351.2 $ Home Appreciation Rate 8.4% 4.2% 3.6% 3.5% 3.6% 3.4% 3.3% 3.1% - Average Monthly Payment $1,384 $1,388 $1,397 $1,491 $1,724 $2,085 $2,249 $2,343 Key Multi-Family Factors - Multi-Family Starts (000) Average New Home Sq Footage 1,226 1,226 1,226 1,226 1,226 1,226 1,224 1,222 - Total Multi-Family Sq Footage (Million) Average Cement Tons Per Start Vacancy Rate (%) Mortgage to Rent Ratio Target Rental Population (20-29) Index Key Nonresidential Factors - Capacity Utilization (%) Office Vacancy Rate (%) Office Worker Employment 30,149 30,820 31,479 32,071 32,675 33,265 33,842 34,392 General Cement Ratios - Cement Consumption (Per 000 Capita) Cement Tons Per Mil Construction Contact: Ed Sullivan, Chief Economist, PCA, (847)

12 Construction Put-in-Place United States (Billions 2009$) Summer Total , , , , , ,232.9 Residential Buildings New Housing Units Single Family Multi Family Improvements Nonresidential Buildings Industrial Office Hotels, Motels Hospitals, Institutions Religious Educational Other Commercial Public Utility & Other Farm Nonresidential Miscellaneous Public Construction Buildings Highways & Streets Military/Public Security Conservation Sewer Systems Water Supply Systems Percent Change Total 6.3% 8.8% 3.1% 3.5% 4.4% 4.4% 4.4% 3.7% Residential Buildings 6.5% 14.4% 2.9% 5.1% 7.2% 7.2% 7.2% 5.1% New Housing Units 8.2% 18.3% 5.7% 8.0% 10.0% 9.7% 9.4% 6.5% Single Family 5.5% 17.4% 3.7% 8.7% 10.9% 10.8% 10.4% 7.1% Multi Family 22.8% 22.4% 14.9% 5.3% 6.3% 4.8% 4.8% 3.5% Improvements 3.5% 7.6% -2.5% -0.9% 0.8% 1.1% 1.2% 1.2% Nonresidential Buildings 11.4% 17.1% 4.8% 3.4% 3.3% 3.2% 2.9% 3.2% Industrial 12.4% 30.8% -7.5% 0.4% 1.9% 2.1% 1.3% 2.7% Office 20.5% 17.2% 14.0% 5.6% 4.8% 4.4% 4.0% 3.6% Hotels, Motels 18.1% 25.5% 20.3% 6.1% 3.3% 3.1% 1.8% 2.7% Hospitals, Institutions -7.1% 10.0% 2.8% 3.3% 3.6% 3.7% 3.9% 3.5% Religious -10.5% 4.7% 1.5% 1.2% 1.2% 1.1% 1.4% 1.1% Educational -5.2% 0.1% 4.3% 3.4% 3.1% 2.9% 3.0% 3.1% Other Commercial 18.9% 7.8% 8.4% 3.6% 3.3% 3.1% 3.6% 3.5% Public Utility & Other 14.4% -9.6% 3.5% 2.3% 1.7% 1.5% 1.6% 1.8% Farm Nonresidential 9.6% -3.9% -4.5% -2.3% -0.6% 0.0% 1.1% 1.4% Miscellaneous 1.6% 3.9% -1.4% -0.5% 2.2% 2.2% 3.2% 2.7% Public Construction -1.1% 3.8% 2.8% 2.3% 2.5% 2.3% 2.5% 2.6% Buildings -4.4% 4.0% 3.6% 1.9% 2.1% 2.2% 2.1% 2.4% Highways & Streets 1.4% 5.2% 4.6% 3.3% 2.8% 2.3% 2.6% 2.4% Military/Public Security -3.3% -8.2% -5.7% -0.4% 0.8% -0.9% -0.6% 0.2% Conservation 20.4% 8.8% 2.2% 0.8% 1.9% 1.9% 1.9% 2.1% Sewer Systems 1.6% 4.4% 1.2% 2.2% 3.4% 3.6% 3.9% 3.7% Water Supply Systems -3.3% -2.4% -7.3% 1.2% 2.9% 3.3% 3.8% 4.1% Contact: Ed Sullivan, Chief Economist, PCA, (847)

13 Portland Cement Consumption United States (000 Metric Tons) Summer Total 86,527 89,733 93,205 97, , , , ,933 Residential Buildings 22,520 24,698 26,741 28,473 30,052 31,925 34,116 36,372 New Housing Units 16,684 18,538 20,506 22,291 23,819 25,625 27,741 29,793 Single Family 13,714 15,201 17,183 18,960 20,479 22,259 24,339 26,345 Multi Family 2,970 3,338 3,323 3,331 3,340 3,365 3,402 3,447 Improvements 5,836 6,159 6,235 6,182 6,233 6,300 6,375 6,579 Nonresidential Buildings 13,773 14,269 15,453 16,205 17,003 17,853 18,632 19,454 Industrial Office 1,598 1,665 1,917 2,064 2,207 2,373 2,554 2,726 Hotels, Motels ,000 1,061 1,121 1,182 1,229 1,289 Hospitals, Institutions 1,433 1,301 1,338 1,407 1,509 1,618 1,736 1,854 Religious Educational 2,261 2,268 2,332 2,395 2,469 2,558 2,652 2,753 Other Commercial 6,824 7,157 7,874 8,279 8,680 9,085 9,408 9,752 Public Utility & Other 3,744 4,420 4,736 4,908 5,056 5,192 5,331 5,488 Farm Nonresidential 3,105 2,959 2,827 2,753 2,736 2,736 2,767 2,805 Oil & Gas Wells 3,128 1, ,297 1,716 1,941 2,166 Miscellaneous 1,942 1,999 1,972 1,993 2,073 2,155 2,273 2,387 Public Construction 38,314 39,730 40,659 41,869 43,206 44,520 45,858 47,262 Buildings 2,062 2,112 2,191 2,260 2,337 2,419 2,501 2,561 Highways & Streets 25,657 27,226 28,234 29,214 30,086 30,904 31,699 32,550 Military/Public Security Conservation 2,726 2,617 2,688 2,716 2,774 2,835 2,895 2,956 Sewer Systems 4,368 4,394 4,431 4,528 4,727 4,944 5,186 5,428 Water Supply Systems 3,346 3,210 2,949 2,984 3,115 3,253 3,413 3,602 Percent Change Total 8.6% 3.7% 3.9% 4.2% 4.4% 4.6% 4.5% 4.5% Residential Buildings -2.0% 9.7% 8.3% 6.5% 5.5% 6.2% 6.9% 6.6% New Housing Units 8.3% 11.1% 10.6% 8.7% 6.9% 7.6% 8.3% 7.4% Single Family 8.8% 10.8% 13.0% 10.3% 8.0% 8.7% 9.3% 8.2% Multi Family 6.0% 12.4% -0.4% 0.3% 0.3% 0.8% 1.1% 1.3% Improvements -22.9% 5.5% 1.2% -0.9% 0.8% 1.1% 1.2% 3.2% Nonresidential Buildings 29.9% 3.6% 8.3% 4.9% 4.9% 5.0% 4.4% 4.4% Industrial 16.6% 14.7% -7.5% 0.4% 1.9% 2.1% 1.3% 2.7% Office 49.3% 4.1% 15.1% 7.7% 6.9% 7.5% 7.6% 6.7% Hotels, Motels 65.6% 17.5% 22.1% 6.1% 5.6% 5.4% 4.0% 4.9% Hospitals, Institutions 9.3% -9.2% 2.9% 5.1% 7.2% 7.2% 7.3% 6.8% Religious 3.6% -19.3% 4.5% 2.3% 2.2% 2.1% 2.3% 2.0% Educational 15.1% 0.3% 2.8% 2.7% 3.1% 3.6% 3.7% 3.8% Other Commercial 36.5% 4.9% 10.0% 5.1% 4.8% 4.7% 3.6% 3.7% Public Utility & Other -5.2% 18.0% 7.1% 3.6% 3.0% 2.7% 2.7% 3.0% Farm Nonresidential 2.0% -4.7% -4.5% -2.6% -0.6% 0.0% 1.1% 1.4% Oil & Gas Wells 4.4% -47.0% -50.7% 16.4% 36.3% 32.4% 13.1% 11.6% Miscellaneous 21.2% 2.9% -1.4% 1.1% 4.0% 4.0% 5.5% 5.0% Public Construction 11.0% 3.7% 2.3% 3.0% 3.2% 3.0% 3.0% 3.1% Buildings 10.2% 2.4% 3.7% 3.2% 3.4% 3.5% 3.4% 2.4% Highways & Streets 7.3% 6.1% 3.7% 3.5% 3.0% 2.7% 2.6% 2.7% Military/Public Security 1.4% 10.2% -2.6% -0.8% 0.8% -0.9% -0.6% 0.3% Conservation 18.8% -4.0% 2.7% 1.0% 2.1% 2.2% 2.1% 2.1% Sewer Systems 24.9% 0.6% 0.9% 2.2% 4.4% 4.6% 4.9% 4.7% Water Supply Systems 21.0% -4.1% -8.1% 1.2% 4.4% 4.4% 4.9% 5.5% Contact: Ed Sullivan, Chief Economist, PCA, (847)

14 U.S. Cement Consumption Forecast United States (000 Metric Tons) Summer Total Cement Consumption 88,843 92,101 95,655 99, , , , ,137 Portland Cement 86,527 89,733 93,205 97, , , , ,933 Masonry Cement 2,316 2,368 2,450 2,555 2,668 2,790 3,028 3,204 - Portland Share of Total, (%) 97.4% 97.4% 97.4% 97.4% 97.4% 97.4% 97.3% 97.3% Cement and Clinker Imports 8,392 11,280 14,224 16,360 18,439 20,971 22,769 22,920 - Import Share, (%) 9.4% 12.2% 14.9% 16.4% 17.7% 19.3% 20.0% 19.2% Percent Change Total Cement Consumption 8.8% 3.7% 3.9% 4.2% 4.4% 4.6% 4.6% 4.6% Portland Cement 8.6% 3.7% 3.9% 4.2% 4.4% 4.6% 4.5% 4.5% Masonry Cement 9.0% 2.2% 3.4% 4.3% 4.4% 4.6% 8.5% 5.8% Cement and Clinker Imports 15.9% 34.4% 26.1% 15.0% 12.7% 13.7% 8.6% 0.7% Contact: Ed Sullivan, Chief Economist, PCA, (847)