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Chereb: Potential wrinkle surfaces in nonbuilding

By |  June 28, 2021
David Chereb

Chereb

Some things that once seemed highly likely only seem somewhat likely – including a new, large infrastructure bill.

This month’s analysis examines the impact for 2021 and 2022 if no new infrastructure bill comes forward. For 2021-22, the impact is minor due to long lead times between congressional action and contract lettings. What impact there is (about 3 million metric tons lower than our base case) hits only nonbuilding construction.

Residential construction is driven by a different set of parameters, as is nonresidential – hence no change for these segments. The biggest impact comes after 2022 and beyond this current outlook.

Segment analysis

By segment, the outlooks for residential and nonbuilding look the most favorable, as low mortgage rates and strong income gains continue to drive housing demand higher. I think a peak in housing activity will hit by year’s end, as prices are getting too high too quickly.

Source: David Chereb Group

Click to enlarge. Source: David Chereb Group

Nonbuilding also looks good – even if there is no new large infrastructure bill – because state and local budgets are in better shape now versus last year. The federal stimulus funds and the rapid pace of the economic recovery will result in more project bidding over the next two years.

The nonresidential segment has the weakest growth potential over the next two years, and yet it is the most exciting as far as innovation is concerned. Our economy and work culture are changing, and developers are finding new ways to provide high-demand products.

Regionally, most demand increases and decreases are rather small by state. California and Florida both remain strong, but they are plateauing after recent strong increases.

Aggregate pricing strength will return by mid-2021 in most areas and fare even better in 2022.

David Chereb Group, Ph.D., is with David Chereb Group (DCG), which produces customized market forecasts by major segment of construction, from the county level up. Clients use DCG market intelligence reports for business planning and acquisition analyses in aggregate, ready-mixed concrete and cement. Visit davidcherebgroup.com for more information.


Featured photo: kozmoat98/iStock / Getty Images Plus/Getty Images


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