2025 Isn't Set in Concrete

Read them bones. Throw the dice. (Is this your card? Some Vegas magic humor there.) You can do what you want but the upcoming year will always be tough to predict. During the Portland Cement Association's (PCA) fall meeting, Ed Sullivan, chief economist and senior vice president of market intelligence for the PCA, presented his updated forecast for the upcoming year. The TL;DR of it all, he says that the Federal Reserve's lowering of interest rates coupled with easing inflation should signal a significant retreat in interest rate levels by the end of next year. Additional key points:

• It will take time for the impact of the Fed’s policy pivot to materialize in the economy and construction. Near term, construction activity is expected to be burdened by oppressively high interest rates. As more rate cuts transpire, construction loan rates are expected to decline — spurring new life into the construction market. This is expected to begin by mid-2025.
• Mortgage interest rates are expected to decline to 5.5% by mid-2025 and to 5.0% by year-end 2025. This is likely to usher in favorable home affordability and a surge in consumer demand. 
• Lower rates will also usher in a significant increase in the supply of existing homes on the market. This is expected to more than offset the increase in demand and lead to a reduction in new and existing home prices. This further enhances affordability.
• Nonresidential construction will also benefit from lower interest rates. Unfortunately, it will take time to improve occupancy rates and a higher Net Operating Income. These will come as the economy gains momentum next year. Given this, nonresidential is not expected to see recovery until 2026.
• Public construction activity is expected to benefit from increased spending associated with the Bipartisan Infrastructure Law.         

Since we're on the infrastructure and the funding coming through, for concrete paving, "the next five years looks promising," says Don Weaver, president of Weaver-Bailey Contractors Inc. and incoming chair of the American Concrete Pavement Association Board of Directors. Yet, he holds a realistic level of confidence as compared to what he thought a couple of years ago. "I don’t know that the confidence I would have had in the middle of 2023 on the perspectives for the second half of the 20’s remains - I have seen a lot of fluctuation in confidence. Companies are plenty busy but margins are down and backlogs not as great. There is ample work out there but greater strain on the entire project schedule from permitting through notice to proceed that comes from additional restrictions in workforce for building departments, inspections and more."

See you in Las Vegas for the universe of products and equipment that is World of Concrete.

Thanks.