Rock to Road

News
Commentary: Aggregates, roadbuilding and forecasting

Aggregates, roadbuilding and forecasting

June 30, 2008  By  Andy Bateman


2007 saw much debate on the concept of “decoupling” and more recently “recoupling” between the U.S. and other major economies.

Advertisement

2007 saw much debate on the concept of “decoupling” and more recently “recoupling”

between the U.S. and other major economies. The decoupling view was fuelled by the extensive

quoting, and misquoting, of Chapter 4 in the April 2007 issue of the International Monetary

Fund’s World Economic Outlook. For a time, even heavyweights such as Goldman

Sachs argued that any U.S. economic woes would have much less impact on other world

economies than has been historically the case. Within the U.S., a key issue was the extent to

which a downturn in the residential sector would impact the U.S. consumer and the rest of

the economy. Fast forward to February 2008 where, driven by fears of a U.S. recession, the

decoupling concept seems to have lost and regained ground almost as fast as Canadian stock

values.

Given all the macroeconomic analysis, recent market turmoil, interest rate cuts and

gloomy U.S. forecasts, is it really possible to predict with any certainty what 2008 will hold

for Canada’s aggregate producers and roadbuilders?

Information gathered for the exclusive report in this issue would suggest that the answer

is still yes. In the report, comments from a number of producers and suppliers paint a picture

of continuing optimism in the western provinces and mostly solid performance elsewhere. In

terms of market demand, recurring themes include increased infrastructure spending, some

modest softening of residential construction and relatively fl at demand in the non-residential

sector.

A separate economic analysis, “Economic and Construction Outlooks for Canada in

2008”, by Alex Carrick of Reed Construction Data – CanaData, seems to be consistent with

this producer and supplier market feedback. Carrick cites three primary reasons why the

Canadian economy has performed better of late than the U.S. economy and expects these

factors to also help Canada perform relatively better than the U.S. going forward. Firstly,

high world commodity prices have been a boon for Canada’s large resource sector, particularly

oil. Secondly, Canadian housing starts have stayed strong and the proportion of subprime

and teaser-rate mortgages is much lower in Canada than in the U.S. Third, Canadian

governments have been in better shape than their U.S. counterparts and have rarely been in

better shape to undertake necessary infrastructure spending.

Mercifully, the words “decouple” or “recouple” don’t appear to be anywhere in the

analysis.

 

 


Print this page

Advertisement

Stories continue below