Momentum Continues

Precast Forecast 2015

NPCA Staff Report

Despite a flat public works sector and questions about federal funding for highway projects, the precast concrete industry should continue its upward momentum in 2015 with a growth of 6%, bringing industry sales to slightly more than $18 billion in North America. It would be a third-straight year of solid growth, after increases of 5.2% in 2013 and an expected 5% increase in 2014, according to the National Precast Concrete Association’s Benchmarking Report. 

“While there are some potential pitfalls and ongoing uncertainty, the mood of the industry is optimistic heading into 2015 and beyond,” said Ty Gable, NPCA president. “We won’t be approaching the peak year of 2007 any time soon, but we are back on solid ground and headed in the right direction.”

The precast sector started its decline in 2008, hitting bottom in 2011 at about 45% down from the peak. Recovery started slowly but has quickened in the past 18 months, even though the housing sector, commercial building and public works have been unsteady.

“The diversity of precast products helps and there are some emerging areas of growth such as precast pavement systems for highway repair that keep us moving forward,” Gable said. “If we could get a long-term highway bill and some movement on rebuilding the failing infrastructure, we’d be in full recovery mode.”

Optimistic outlook

The forecast for the construction industry as a whole is even more optimistic after several years of tepid recovery. Robert Murray, chief economist and vice president of Dodge Data & Analytics, forecasts a 9% increase in construction starts in the Dodge Construction 2015 Outlook report.

“I think we’re moving beyond a hesitant, gradual recovery into something more broad based,” Murray said at the McGraw Hill Outlook Executive Conference last November in Washington, D.C. “We are in a cyclical upturn reminiscent of the early 1990s.”

That upturn was the leading edge of an unprecidented 20-year expansion in construction. And while Murray said he doesn’t think this expansion will last 20 years, “the broad picture is of a market that is strengthening,” he said. “The cyclical upturn that has taken longer to get going is continuing to unfold.”

The American Institute of Architects Consensus Construction Forecast echoes that analysis. The AIA forecast averaged seven industry economic reports to arrive at an 8.1% increase for 2015 in total nonresidential construction. AIA’s Architecture Billing Index, a leading indicator of future construction activity, has also been trending upward to its highest levels since before the last downturn, said Kermit Baker, AIA chief economist, during a webcast of economists sponsored by Construction Market Data (formerly known as Reed Construction Data). The billing index has topped 55 in recent months. Any score above 50 indicates an increase in design activity. One of the reasons for the increase, Baker said, is that “firms are reporting that stalled projects during the downturn are coming back to life and they’re seeing work come out of the projects that were previously on hold. And secondly, a lot of new design projects are coming in, which will generate future billings in the months to come.”

Ken Simonson, chief economist for the Associated General Contractors of America, agrees with NPCA president Gable that funding for highway projects will likely remain flat. Simonson believes the lack of appetite to fund highway and street construction in Congress will not change.

“It’s going to be very hard for Congress to agree next year on extending the highway aid bill,” Simonson said. “It’s been passed through the end of May but there are a lot of members of Congress and in the Republican majority who would like to see the federal program cut back and hardly any willing to vote for either general fund transfers, which we’ve had the last several years, or new taxes. And yet without those, the states won’t be able to go ahead with nearly as much new construction as we’ve been seeing.”

So while the overall outlook for the construction industry is mostly positive, the anticipated funding level for public works projects will likely create a drag on the overall growth in the precast concrete industry in 2015 and 2016.

Forecast by precast segment

NPCA’s Precast Forecast 2015 is segmented by product line and includes five major sectors of the precast concrete industry and an “other” category that encompasses a wide variety of products. These figures are based on the annual Precast Industry Benchmarking Report published by NPCA. Compiled by Industry Insights, an independent manufacturing research firm, the NPCA Benchmarking Report is based on a survey of precast concrete manufacturers in North America.

Building and Landscaping Products $3.65 billion 

Includes architectural wall panels, architectural building components, prestressed structural building elements, basement/wall foundation panels, steps and basement entries, burial vaults and other related landscaping and building products. 

Sanitary and Stormwater Products $4.7 billion 

Includes manholes, concrete pipe, stormwater management and retention structures, curb inlets, catch basins and other related products. 

Transportation Products $3.2 billion 

Includes box culverts, 3-sided structures, highway and traffic barrier, retaining wall systems, sound wall/barrier, prestressed bridge elements, precast concrete pavement systems and other related products.

Utility and Industrial Products $4.15 billion 

Includes utility vaults, utility buildings and other related products.

Water and Onsite Wastewater Products $1.4 billion 

Includes septic tanks, grease interceptors and other related products.

All Other Precast Concrete Products: $1.1 billion 

Total Precast Sales Volume: $18.2 billion 

Total Resale Items: $2.6 billion

Total Volume Including Resale Items: $20.8 billion