ROAD TO RECOVERY BY DAVID CHEREB AGGREGATE FORECAST OPTIMISM FOR KEY SEGMENTS With a new Congress saddled and ready to go, the outlook for nonbuilding construction improves W e are going to hear a lot about New Monetary Theory over the next few years. This theory will directly impact aggregate consumption due to more stimulus spending. I know what you’re thinking: An economist always tries to make everything about economics. But the next major stim-ulus bills that are passed – and it seems more are likely now – will justify the bills based on infrastructure needs and New Monetary Theory. The short version of the theory says government deficits don’t matter, as long as inflation stays low. Therefore, if we have current needs, spend now and don’t worry about the debt. This sounds pretty good, but just remember the “as long as” phrase in the definition. WHAT TO KNOW We are now on a new path for the economy and con-struction. We have several vaccines, we have trillions of new dol-lars floating around, and we have a new political di-rection. All point to more spending and to higher con-struction growth. The im-pact will be muted for most of 2021, but it will really kick in by the end of this year. The biggest change in the outlook is the stronger out-look for nonbuilding. While most of the new spending will be for non-infrastruc-ture, enough will find its way into this segment to provide a substantial boost to aggre-gate consumption. Even nonresidential will While most new government spending will be for non-infrastructure, David Chereb says enough will find its way into the nonbuilding construction segment to provide a substantial boost to aggregate consumption. 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 be boosted by 2022 as the pandemic fades into history and more normal work patterns return. The work patterns will not completely return to pre-2019 levels due to the structural changes embedded in our culture now. Regionally, the colder states and the West Coast will do better than the prior outlook because they will get bailed out in the new spending bills coming through Congress. Even so, the rapid growth areas remain the Sun Belt and U.S. Aggregate Demand Mountain states. Locally, the suburbs will continue to account for the majority of new housing, as lower density will continue to be desired. Aggregate pricing strength will return by late 2021 in 2015 2016 2017 2018 2019 2020 2021 2022 most areas. P & Q Residential Nonresidential Nonbuilding Source: David Chereb Group Billions of metric tons Total Aggregate Consumption (billions of metric tons) 2016 2017 2018 2019est 2020est 2021est 2022est RESIDENTIAL NONBUILDING TOTAL NONRESIDENTIAL 0.72 Yr/Yr/%Ch 0.57 0.70 1.03 1.00 2.32 2.27 +2.7 -2.2 0.57 0.57 0.56 0.71 0.78 1.08 1.17 2.36 2.51 +4.0 +6.4 0.54 0.68 1.16 2.38 -5.2 0.60 0.62 1.14 2.36 -0.8 0.58 0.65 1.21 2.44 +3.4 Note: There is a small difference between our estimates of consumption and the U.S. Geological Survey (USGS) because of our own estimates in states where USGS does not report values due to competitive concerns. 16 PIT&QUARRY February 2021 Sponsored by VDG (Van der Graaf) P&Q STAFF Source: David Chereb Group David Chereb, Ph.D., is with David Chereb Group (DCG), which produces customized market forecasts by major segment of construction, from the county level up. Cli-ents use DCG market intel-ligence reports for business planning and acquisition analyses in aggregate, ready-mixed concrete and cement. Visit davidcherebgroup.com for more information.
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