More aggregate demand, pricing gains on horizon

By |  September 24, 2019
Click to enlarge. Source: S-C Market Analytics

Click to enlarge. Source: S-C Market Analytics

It is beginning to feel like the only thing working is the economy.

This economic cycle, as mature as it is, continues to perform as if we are in the middle stage of a recovery instead of near the end. All sectors are doing well. Some are not growing as fast as last year, but they are still growing.

At this stage of an expansion, an external event can stop growth in its tracks. We don’t see anything now – not even a protracted trade dispute with China – that will cause a sharp slowdown.

Global activity seems to be slowing, especially in Europe, and that will make strong growth in the United States harder. Still, everything in economics is connected, so the slowdown in Europe and China is leading to lower interest rates here. That’s a good thing.

Because of this and a few other things, construction activity will continue to grow. The residential and nonresidential slowdowns will get a little boost, helping them to maintain where they are – and even grow some. This is all very unusual for an economy that has been growing for nine-plus years.

The growth patterns will be shifting in 2020. Because the past three years have been so strong for the Southeast, most of these states will grow only moderately in 2020, with a few declining due to overbuilding in housing.

The strongest growth will be in the Mountain West, where gains in energy production and favorable lifestyle conditions are attracting more families and businesses. Manufacturing states will also do well, as solid job growth and gains in tax receipts will help public works projects.

On balance, the default outlook is for continued growth in aggregate demand and solid gains in pricing.

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.

Comments are closed