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2013 Cement consumption growth dependent on resolving the fiscal cliff, says PCA

World Cement,

A Portland Cement Association (PCA) forecast has predicted a 7.5% growth in 2012’s cement consumption, up 50 basis points from its summer forecast. However, the PCA has said that instability in the political landscape makes projecting 2013 consumption more challenging.

Although cement consumption and overall U.S. construction activity increased by a greater than expected amount in 2012, these gains would be immediately erased in 2013 if the fiscal cliff is not resolved in a timely manner.

The ‘fiscal cliff’ came about from dual economic objectives reflecting the need to inject fiscal stimulus into an inert economy and the need to deal with burgeoning federal debt. Packaged together as the Budget Control Act of 2011, tax increases of US$400 billion coupled with US$200 billion in federal spending cuts are scheduled to become effective as of 1 January 2013.

In the case of Congress being able to resolve the fiscal cliff during the 2012 lame duck session, PCA expects the economy to continue to grow and cement consumption in 2013 to increase by 6%. Conversely, even if Congress addresses the policies by the end of 1Q13, this delay will cause significant economic harm and cause a 2.7% drop in cement consumption.

Chief Economist for the PCA, Ed Sullivan, said, “Because we believe the odds for either outcome are even, we have adopted a forecasting approach that minimizes up and downside risk. Our baseline scenario blends the two possible outcomes and projects a 1.8% increase in cement consumption in 2013.”

Sullivan also reported that the longer Congress delays in addressing the fiscal cliff, the greater the adverse effects on economic growth and construction activity will be, saying, “If no action is taken by mid-2013, the country could be headed for a severe recession.”

According to the PCA report, cement consumption for the first three quarters of 2012 had increased 10% percent compared to last year, with 16 consecutive months of growth. Sullivan attributes this growth to the return of consumer confidence, a strong housing market, and most importantly, growth in employment.

Adapted from press release by Jack Davidson.

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