A Special Report: Bulk fleets should be kept busy

Jan. 1, 2003
CONCRETE production in 2003 should increase 1% to 2% over last year's level, based on cement consumption levels projected by Portland Cement Association

CONCRETE production in 2003 should increase 1% to 2% over last year's level, based on cement consumption levels projected by Portland Cement Association Chief Economist Ed Sullivan. In the most optimistic scenario, where commercial construction rebounds moderately while home building and public works hold steady, cement consumption and concrete output would edge near levels of 2001, which marked the industry's seventh consecutive record-volume year.

Supporting Sullivan's figures are conditions in key segments that other economists reviewed at Reed Construction Data's 2003 North American Construction Forecast Conference in Washington DC. Associated General Contractors Chief Economist Ken Simonson noted during the mid-October 2002 event that construction related to consumer activity should remain strong, and business-related construction will pick up gradually in 2003 if the economy continues to strengthen. However, government-funded projects are likely to diminish once current jobs are completed.

Simonson cited two key indicators of construction industry health: employment and value put in place; both are relatively flat in construction nationally. Supporting this view, the Census Bureau reported that nationwide construction that was put in place for the first eight months of 2002 was virtually unchanged from the same period of 2001. The seasonally adjusted figures for August, $830 billion, were just 0.4% below the total for July. From August 2001 to August 2002, public construction rose by 8%, while private nonresidential building activity fell by almost 19%.

Other industry economists and analysts rounded out the NACF Conference with a look at individual construction sectors and markets in Canada and Mexico.

Commercial real estate

Federal Reserve Bank of Richmond (Virginia) Vice-President and Senior Economist Ray Owens III noted that even with a sluggish economic recovery, prospects for improvement in the commercial market appear in place for 2003. Net space absorption, which had been negative nationwide at about 30 million square feet, is now working its way back. Looking at recent absorption rates versus total supply, Owens also noted that there is a 13-year supply of sublet space on the market. The amount being absorbed currently is low yet rising, he explained, while available space is being capped somewhat by a sharp decline in construction — pointing to a favorable correction soon.

Residential outlook

National Association of Home Builders Chief Economist David Seiders reported the housing sector has done extremely well in a tough economic environment. He said the best bet is funds rate stability through third quarter 2003. Long-term mortgage rates are currently at 6%, the lowest since the mid-1960s. Seiders said he was forecasting rates to continue to average that in fourth quarter 2002 and then rise gradually in 2003 and 2004.

Retail/industrial/office construction

Legg Mason's Glenn Mueller, managing director of Real Estate Investment Strategy, foresees stable but modest demand growth moving into 2003. Supply is slowing down, creating market equilibrium that is good for the economy. The return to a growth phase should come in late 2003.

Reed Construction Data Vice President Roger Grant rounded out the NACF Conference's continental perspective with a look at Canada and Mexico.


The Canadian housing market is at a 10-year high with close to 200,000 starts, which is well above a more sustainable rate of 160,000. The forecast for housing construction in 2003 anticipates a moderate decline of about 10% to 173,000 starts. In the non-residential sectors, institutional and engineering have been relatively stable, while the commercial and industrial sectors suffer from a high office vacancy rate of 12%. Based on a forecast of general strength in the Canadian economy, Grant expects all non-residential sectors to make a comeback in 2003.


The economy is expected to grow at a 4% rate in 2003, fueling a construction market growth of over 5%. Inflation rates are declining and projected to be under 5% for all of 2002 and moving below 4% during 2003. Deficits are also declining indicating an overall stable economy. More than 50% of the total construction value in Mexico is in housing. With an increase in US funds for mortgage loans, economy housing is projected to grow steadily in 2003 with other sectors of construction expected to see growth as well, though at lower rates.

Editor's Note

This Construction Forecast report was prepared by the staffs of Cement Americas, Concrete Products, and Modern Bulk Transporter using information provided by Reed Construction Data, the Portland Cement Association, and the American Road & Transportation Builders Association.