Quarry Equipment Marketplace

MAR 2015

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Page 22 of 51

said Sullivan. "The time it takes for oil prices to impact consumer/business behavior is short, but impacting the decision to build is a longer process." Sullivan delivered his remarks on the construction marketplace at this year's World of Concrete show in Las Vegas. He framed his discussion with an update on present market conditions: • Job creation exceeds 3 million net new jobs 2015-2017. • Strong job growth in context of sub-6 percent unemployment suggests pressure on wages. • Consumer confdence/sentiment has improved signifcantly and will continue. • Low oil prices add 20-30 basis points to economic growth. • Infation remains low, interest rates expected to only gradually increase, slower increases in home prices and stronger increases in rents. New home affordability remains favorable in absolute terms and against rents. • Lending risks subside and lending standards ease. • Economic recovery moving into higher growth phase in the years ahead, in excess of 3 percent growth on a sustained basis. Sullivan sees cement consumption increasing in 2015 by 8 percent to 93 million metric tons, and another 7.9 percent in 2016 to approximately 100 million metric tons. Sullivan also said he expects housing starts to rise to 1.2 million units, driving demand for residential construction, which will commandeer 54 percent of all cement usage. Multifamily units in particular should see a signifcant increase in starts compared to previous years with a 12 percent jump from 2014 levels. Nearly 400,000 multifamily starts are expected in 2015. Nonresidential construction will use 29 percent of cement consumption, while public construction take up 15 percent. In focusing on the impact of low oil prices on the construction market, Sullivan believes consumer savings will equate to a positive impact on construction spending, while noting that oil-producing states and regions may not get the same consumer effect. Sullivan also pointed to the example of hotel construction. He believes that with lower oil and fuel prices, consumers react with increased travel, which raises occupancy rates, which accelerates hiring and ultimately leads to more construction. Sullivan, on the other hand, thinks that low oil prices will not lead to a lowering of asphalt prices, citing a 10-year analysis of oil-price impact. Severe Weather Knocks Housing Starts Down Nationwide housing starts fell 2 percent to a seasonally adjusted annual rate of 1.065 million units in January, according to newly released data from the U.S. Commerce Department. This drop was mainly due to a 22.2 percent decrease in the Midwest. Single-family housing production fell 6.7 percent to a seasonally adjusted annual rate of 678,000 in January while multifamily starts rose 7.5 percent to 387,000 units. "These numbers are consistent with our recent surveys and are primarily due to severe weather hitting the Midwest and other parts of the country," said National Association of Home Builders (NAHB) Chairman Tom Woods, a home builder from Blue Springs, Mo. "After a strong single-family report in December, it is not surprising to see some pull back in January," said NAHB Chief Economist David Crowe. "With continued job creation and a growing economy, single-family production should make gains in the year ahead." Regionally in January, combined single- and multifamily housing production increased 6.5 percent in the South. Total starts fell in the Northeast, Midwest and West, with respective losses of 3.5 percent, 22.2 percent and 3.4 percent. Overall permit issuance was down 0.7 percent in January to a rate of 1.053 million. Single-family permits decreased 3.1 percent to 654,000 units while multifamily permits rose 3.6 percent to a rate of 399,000 units. Regionally, permits were mixed in January. The Northeast and West registered gains of 29.5 percent and 16.8 percent, respectively, while the Midwest and South dropped 16 percent and 8.7 percent, respectively. Housing Markets Improve Markets in 63 of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the fourth quarter of 2014, according to the National Association of Home Builders/First American Leading Markets Index (LMI). This represents a year-over-year net gain of 11 markets. The index's nationwide score moved up slightly to .90, meaning that based on current permit, price and employment data, the nationwide average is running at 90 percent of normal economic and housing activity. Meanwhile, 69 percent of markets have shown an improvement year-over-year. "The markets are improving at a consistent pace," said NAHB Chairman Woods. "A growing economy and rising consumer confdence should help drive the release of pent-up demand in 2015." Baton Rouge, La., continues to top the list of major metros on the LMI, with a score of 1.41 – or 41 percent better than its last normal market level. Other major metros leading the list include Austin, Texas; Honolulu; Houston; and Oklahoma City. Rounding out the top 10 are San Jose, Calif.; Los Angeles; Salt Lake City; Charleston; S.C.; and Nashville, Tenn. "The encouraging news is employment, where the number of metros that reached or surpassed their norms rose by 23 in a year," said NAHB Chief Economist David Crowe. "However, single- family permits are only at 44 percent of normal activity, and remain the sluggish component of the index." Regards, Mark Kuhar, Editor Rock Products Magazine Mining Media International Member: Construction Writers Association March 2015 QEM – Quarry Equipment Marketplace Page 21

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