Aggregate industry demand remains strong

By |  September 19, 2018
Photo courtesy of Kevin Yanik

Photo by Kevin Yanik.

Most areas of the country are doing well. Construction and economic activity are strong and should remain strong throughout 2018 and into 2019. Strong economic and profit growth are leading to higher wages. As a result, aggregate growth will go higher for the next several years.

The population in all states is higher now than 10 years ago. The states you would expect have grown the fastest. The exceptions are North Dakota, a fracking beneficiary, and California, suffering from too much past growth (40 million people by the end of 2018).

Even employment is now higher than 10 years ago in most states, an indication that we have moved beyond the clutches of the enormous 2008-2010 recession.

For employment, local policies, tax burdens and new business startups explain why some states are adding jobs at a blistering pace or muddling along due to decades of poor management.

Aggregate demand has not kept pace with population and employment growth in most areas, hence the per-capita consumption of aggregate is lower now than 10 years ago. There are lag effects at play, and in this expansion construction has been a lagging segment of GDP.

For the next few years, construction should return to its normal place as a leading factor in national output. It will be infrastructure spending that drives most of the increases in aggregate over the next few years, and maybe for the next decade.

Regionally, Texas is in a class all its own. The oil and gas boom is once again driving Texas growth even as the state has diversified during the past 20 years. Other states are doing very well and will soon reach record consumption levels.

Dr. David Chereb has many years of experience forecasting construction materials, and his web-based forecasting models have captured every major turning point in materials demand for more than 15 years. Chereb received his Ph.D. in economics from the University of Southern California.

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