1. Market Performance Cement consumption grew by 9% in 2012.
43 states recorded growth.
Up 6.3 million metric tons.
Construction activity grew 6.0%.
First time construction growth achieved in seven years.
Consumption gains have been achieved in the context of sluggish economic growth.

2. Portland Cement Consumption Thousand Metric Tons=
2011
2012
2013
2014
2015
2016
2.7%
9.0%
6.2%
9.2%
10.6%
11.1%

3. Bottom Line
PCA has been among the most pessimistic construction forecasters
Broke away from herd mentality in 2006/2007 – among the first to call for a downturn - Wall Street Journal
Based on assessments of underlying fundamentals
New Optimism

4. Economic Outlook Presentation Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

5. Slow First Half: GDP Growth
Fiscal cliff hangover and sequestration debate will hinder consumer confidence & spending gains.
Tax increases
Spending cuts
Employment gains expected to remain near 150K monthly.
With policy clarity, businesses & banks re-evaluate past investment & lending strategies.

6. Tax & Spending Adjustments: 2013 Percentage of GDP
Fiscal Cliff
Current

7. Sequestration: Direct Construction Impacts Millions of Dollars

8. Sequester Impact On Construction Billions $

9. Sequester Impact On Construction Billions $

10. Ingredients for Real GDP Strengthening
Ability to Increase Spending Activity
Willingness to Increase Spending Activity
Trigger Point
Consumer debt service: very favorable.
Pent-up demand: very favorable.
Employment gains: stable & improving.
Corporate Profits: very favorable.
Bank Profits: very favorable.
External Conditions: stabilizing.
Fiscal Uncertainty must subside at federal & state level.
Focus must shift away from political uncertainty and towards economic fundamentals.

11. Waiting for the Trigger
Past Recession was worst economic downturn since the great depression
8.5 Million job loss
Reinforced by huge declines in other economic metrics
Construction activity declined 38%
Housing starts declined 73%
Cement consumption decline 44%.

12. Waiting for the Trigger
Recession has been so harsh, expectations for future growth have been distorted
“New Normal”
Prolonged period of 2% growth – Deal with it!
Some merit to these arguments
Structural changes have materialized
But…complete dismissal of business cycles and how they work.

13. Waiting for the Trigger
Recessions correct imbalances created during the previous boom period.
The larger the imbalance, the longer the period of cleansing.
Sustained hardship has shaken confidence and unrealistically led some to believe that hardship is the new reality.
Politics has amplified shaken confidence.

14. Worrisome Federal Debt Percentage of GDP
Federal debt presently at highest levels in post WWII Era

15. Household Debt as a Percentage of GDP Percent
Household Debt as a Share of GDP

16. Household Debt Service Percent Cost of Debt Relative to Income
Record high debt service burden signaled a decline in consumer spending
Near lowest level in 30 year horizon

17. Waiting for the Trigger
Prolonged hardship creates powerful positive forces waiting to be unleashed.
Huge pent-up demand waiting on the sidelines.
Consumer, business, housing & public
Consumers, business, government and banks were forced to fix their fiscal order and stand ready/able to spend.
Consumers deleveraged debt, business improved efficiency, government shed excesses, banks restored their strength and credit quality.

18. Pent-Up Demand Magnitude: Light Vehicles Thousand Sales Car & Light Truck
Light Vehicle Pent-up demand:
24 million
Light Vehicle Pent-up demand:
6.4 million
Light Vehicle Pent-up demand:
4.9 million

19. Total Housing Starts Thousand Starts
1.1 Million Home Overbuild
4.2 Million Home Under build =

20. Waiting for the Trigger
A trigger is needed to unleash these powerful forces.
Renewed confidence .
Timing is difficult to forecast.
Two camps: New Normal (it never fully returns) Versus Business Cycle
It may be coming sooner than many believe and unleash more economic vigor than most expect.

21. Strong Second Half: GDP Growth = Plus 3%
Consumer, business & banking confidence improves significantly as the focus shifts to underlying economic fundamentals and away from politics.
Delayed business investment due to political uncertainty begin to be released – adding 0.3% to real GDP growth.
Improved confidence & political clarity consumer & business investment increases.
Employment gains accelerate to an average of 175K to 200K monthly,

22. Housing Outlook Presentation Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

23. Ingredients for a Starts Recovery
Homebuilders Expected ROI
Inventory no higher than 5 months supply
Price stability
Weaker the price environment…lowers the months’ supply trigger point.
Carry costs erode expected ROI.

24. SF Home Prices Annual Y-O-Y Percent Change
Median Price,
National Association of Realtors
Prior to good July (168K) numbers = 876K annualized 3 month moving average
Standard & Poors’ Case-Shiller

25. Months Supply Inventory Inventory/Monthly Selling Rate
Existing Homes
Prior to good July (168K) numbers = 876K annualized 3 month moving average
New Home

26. % of loans in foreclosure, SA Source: Mortgage Bankers Association
Foreclosure Pipeline
28%
51% /
% of loans in foreclosure, SA
% of loans 90 days past due
Source: Mortgage Bankers Association

27. Housing Starts Outlook Thousand of Starts

28. Nonresidential Outlook
Presentation
Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

29. Nonresidential Cement Outlook Thousand of Starts

30. Public Outlook Presentation Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

31. Composition of Highway Spending Millions of Real $

32. State Deficits: Recessions & Recoveries Billion Real $
Crash-Boom Cycle
Increased Volatility

33. State Fiscal Conditions Billions, Net Surplus

34. State & Local Roadway Spending As a % of Total State Spending

35. Local Tax Revenue Sources4%
17% 6%

36. Single Family Price Changes: Local Revenue Proxy
Property tax revenues have been hurt by home price declines. Home prices are rising, but long lags may exist between property values and local revenues

37. Changes in Property Tax Rates Estimated Percent Changes

38. Local Employment & Home Prices
Based on Three Year Lag Between Home Prices and Employment, the ongoing improvement in prices implies a significant upturn in local spending beginning in 2015
Home Prices Lagged Three Years

39. Summary Presentation Summary of Results
Comparative Life Cycle Analysis Research
Building Materials
Single Family, Multi Family, and Commercial Structures
Done By
MIT Concrete Sustainability HUB

40. Portland Cement Consumption Thousand Metric Tons=
2011
2012
2013
2014
2015
2016
2.7%
9.0%
6.2%
9.2%
10.6%
11.1%

41. Nonresidential Intensity : Trends & Forecast
80% Recovery
100% Recovery Boosts Nonresidential Cement Consumption by 4 MMT

42. Public Intensity : Trends & Forecast
84% Recovery
100% Recovery Boosts Public Cement Consumption by 3 MMT

43. Portland Cement Consumption Thousand Metric Tons=

44. Ed Sullivan Chief Economist, Group VP IEEE - Orlando
Cement Outlook
Ed Sullivan
Chief Economist, Group VP
IEEE - Orlando