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Preparing an economic forecast in early March 2020 proved a fruitless task, according to Ed Sullivan, a vice president and the chief economist of the Skokie, Illinois-based Portland Cement Association. Sullivan presented recaps of his 2020 and 2021 forecast at a press conference at the ConExpo-ConAgg event in Las Vegas in mid-March, and at the annual meeting of the Construction and Demolition Recycling Association (CDRA), also in Las Vegas.
In the 10 days leading up to ConExpo, said Sullivan: several candidates dropped out of the presidential election; oil prices plummeted; the stock market in the United States and other nations lost tremendous value; the U.S. joined Asia and Europe with growing coronavirus cases and reactions; and the Federal Reserve Bank in the U.S. reduced interest rates to try to stave off coronavirus impacts. “A piece of cake,” joked Sullivan regarding creating a forecast.
The presentation and forecast devised by Sullivan thus included three scenarios for how the coronavirus could impact the U.S. economy, ranging from the shortest-term impact to a longer, more severe set of effects.
He selected the least damaging scenario as the most likely as of Wednesday, March 11, but acknowledged conditions were changing rapidly. In his preferred scenario, Sullivan sees six-to-eight weeks of economic disruptions, in particular to travel and leisure time discretionary spending. In that scenario, “panic and fear” in the U.S. would be relatively contained to a short time frame and the leisure sector, and a combination of lower interest rates and oil prices would help spur a rebound by the third quarter of 2020.
Sullivan said that if virus concerns remain beyond April and May, the prolonged fear would more deeply hit the American household consumer, “who accounts for two out of every three dollars” spent in the U.S. economy. Preliminary polling has already shown, said Sullivan, that when coronavirus cases are found geographically close to people, they can quickly change their behavior.
Underlying the coronavirus concerns, said Sullivan, is the notion that the U.S. economy is “due” for a recession after more than 10 years of steady growth. Dispelling that notion, said Sullivan, is the case of Australia, where economic growth has been ongoing for 27 years.
On the other hand, Sullivan said there are factors pointing to the idea that the U.S. is “in the late stages” of an economic upcycle. Even though employment figures are good, some 50 percent of metropolitan areas are exhibiting growth rates that show signs of being late stage. When that figure hits 60 percent, said Sullivan, that means a recession hits 12 to 18 months later.
The U.S. economy has lost some of its “zip and vigor,” said Sullivan, and the extent of coronavirus reactions will play a role in determining whether the U.S. can maintain economic growth through the turmoil, or if it experiences some negative growth quarters.
On the infrastructure and construction front, Sullivan says some 30 states have done what the federal government refuses to do—raise their per-gallon gasoline tax. This has helped some states boost their highway and transportation spending, raising the amounts of cement and concrete going into public works.
