The Portland Cement Association (PCA) presented a look to 2025 at its annual Fall Meeting in Aurora, Colorado, with Ed Sullivan sharing an economic forecast with cement company leaders.
Sullivan, chief economist and senior vice president of market intelligence at PCA, says the Federal Reserve’s recent decision to lower interest rates, coupled with easing inflation, signals a significant retreat in interest rate levels by the end of next year. Sullivan says all of this activity should benefit construction.
Additionally, Sullivan says it will take time for the impact of the Fed’s policy pivot to materialize in the economy and construction. In the near term, he expects high interest rates to burden construction activity. As more rate cuts transpire, construction loan rates are expected to decline and spur new life into the construction market.
PCA expects all of this to begin by mid-2025.
Sullivan points to lower mortgage interest rates – ones in the 5 to 5.5 percent range – to usher in favorable home affordability and a surge in consumer demand by the end of next year.
As such, Sullivan expects lower interest rates to support an increase in the supply of existing homes on the market. He anticipates this to more than offset an increase in demand, leading to a reduction in new and existing home prices.
Sullivan also expects nonresidential construction to benefit from lower interest rates, although that impact won’t be felt until 2026 when a recovery in the sector gets underway.
As for public construction activity, Sullivan expects the sector to benefit from increased spending associated with the Infrastructure Investment & Jobs Act.
