Rock Products

FEB 2019

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82 • ROCK products • February 2019 www.rockproducts.com At World of Concrete in Las Vegas, Ed Sullivan, executive vice president and chief economist for the Portland Cement Association, noted that the state of the economy is good. Sullivan's presentation is one of the highlights of the show each year. •  He is predicting cement production increases of 2.6 percent,1.6 percent, 0.8 percent, 1.8 percent and 2.1 per- cent from 2019 to 2023. •  He is predicting construction spending increases of 2.2 percent, 1.5 percent, 0.9 percent, 1.1 percent and 1.3 percent from 2019 to 2023. While discussing the state of the econ- omy, Sullivan pointed to these factors as positives: •  Sustained strong job creation and low unemployment rates. • Wage gains compounded by tax cuts. •  Increase in home values generates wealth gains. • Household debt burdens are low and credit quality is strong, leading to easier access to credit. •  Interest and inflation rates rise, but slowly and well below historical norms. •  Willing and able consumers. Business taxes may add strength to investment. "All this will take time to unravel under normal cyclical conditions," Sullivan said. In the private sector, Sullivan noted that labor shortages persist. Inflationary pressures are rising, in part due to U.S. Sullivan Predicts Cement Increases European Quality Association, as well as Apollo Root Cause Analysis from Effective Problem Solving, LLC. She is a member of the American Chemistry Council and TRANSCEAER, a voluntary national outreach effort that focuses on assisting communities to prepare for and to respond to a possible haz- ardous materials transportation incident. fiscal policies. "The Federal Reserve will continue to raise interest rates," Sullivan said. Another trend to watch: prices are rising. Interest rates are also rising. Housing affordability is deteriorat- ing. This will slowly erode residential cement consumption, according to Sullivan. There is also growing concern regard- ing Collateralized Loan Obligations ($1 trillion) and erosion in credit quality. This concern could slow credit. In the public sector, Sullivan pointed to simulative "fiscal" policy, which when unemployment is so low, could add stress to labor markets (tax reform, immigration policy, trade friction, infra- structure spending). He also noted these factors to watch closely: •  Tariffs at a minimum create economic uncertainty. •  Strong job creation, increases state revenues. Entitlement spending has forced state expenditures to rise even faster. Deficits are emerging and are reducing state construction spend- ing – even during good times. As job growth slows, deficits will increase and so will construction cutbacks. •  Federal deficits will exceed $1 tril- lion annually by 2020 presidential election. • The possibility of Federal Sequestra- tion emerges in 2020 and represents GDP growth risks. • A Trump Infrastructure plan may be late to the rescue and smaller than expected.

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