PCA Outlook: 2015-2019 Ed Sullivan Chief Economist, Group VP PCA 1 Overview Putting Things Into Context: Economic Outlook • Job creation exceeds 3.0 million net new jobs 2015-2017. – Stronger household formation • Strong job growth in context of sub-6% unemployment suggests pressure on wages. • Consumer confidence/sentiment has improved significantly and will continue. • Low oil prices add 20-30 basis points to economic growth. – Regional disruptions among energy producing states. Putting Things Into Context: Economic Outlook • Inflation 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% growth on a sustained basis. – Healing of excesses, and huge pent-up demand. Portland Cement Consumption Thousand Metric Tons 140,000 2014 = 8.2% 2015 = 8.0% 120,000 100,000 80,000 60,000 40,000 20,000 0 1998 2000 2002 2004 2006 Current Forecast 2008 2010 2012 2014 2016 2018 Spring Forecast Composition of Changes in Cement Consumption Share of Total Growth 2014: +6.5 MMT Public 23% 2015: +6.9 MMT Res 13% Non Res 64% Public 15% Non Res 29% Res 56% Composition of Changes in Cement Consumption Annual Percent Change, Real Put-In-Place Construction & Cement Intensity 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Intensity -15.0% Construction -20.0% -25.0% -30.0% 2007 2009 2011 2013 2015 2017 7 Construction Sector Outlook Putting Things Into Context: Housing Outlook Housing Starts Days supply is low and starts activity is targeted to roughly 5 monthly supply throughout the forecast. 2,500 • New home prices rise at rates above inflation rate. 1,500 • Constraint to construction such a labor shortages & property availability - are assumed to be temporary and fixed by the market. 1,000 500 2019 2017 2015 2013 2011 2009 2007 0 2005 Starts mix remains trending toward multifamily. 2,000 2003 • Thousands of Units 2001 • Update: Job Creation Relationship to Changes in Cement Consumption Past 12 Months, Thousand Net New Jobs, Thousand Tons 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 c c Net Job Creation Change in Cement Consumption 10 State Deficit Outlook Net Balance (Revenues Less Expenditures) $000 150,000,000 100,000,000 50,000,000 0 -50,000,000 -100,000,000 -150,000,000 -200,000,000 -250,000,000 -300,000,000 2007 2009 2011 2013 2015 2017 2019 Portland Cement Consumption Thousand Metric Tons 140,000 2014 = 8.2% 2015 = 8.0% 120,000 100,000 80,000 60,000 40,000 20,000 0 1998 2000 2002 2004 2006 Current Forecast 2008 2010 2012 2014 2016 2018 Spring Forecast Oil Price Adjustments West Texas Intermediate Oil Prices Per Barrel 120 $107.40 $99.57 100 $94.12 $97.00 $93.10 $86.60 $79.40 80 $76.20 $66.02 60 $55.00 40 20 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Energy Industry Wages as Share to Total State Wages WA NH MT ME VT ND OR MN ID SD MA NY WI RI WY MI CT IA PA NE NV UT IL DE CO MD WV CA NJ OH IN VA KS MO KY NC TN AZ OK NM AR SC MS AL GA LA TX FL 9%+ 8% to 5% 4-1% No Impact Asphalt Prices & West Texas Intermediate Prices $ Per Barrel, Asphalt PPI 1.5% Increase New Record High For Asphalt 270 220 170 120 70 Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-14 44% Decrease In WTI 20 Summary PCA Outlook: 2015-2019 Ed Sullivan Chief Economist, Group VP PCA 18