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U.S. Construction Chemicals: Economic Indicators Pointing To Stronger Growth Ahead

Posted By ASC, Thursday, July 13, 2017
Updated: Thursday, July 13, 2017

From Grace Matthews Quarterly Chemical Industry Newsletter...

 

The housing crisis has been widely cited as one of the primary causes of the Great Recession. Supported by low interest, “subprime” loans, whose risks were often off-loaded to esoteric (aka “toxic”) derivative securities, home values rapidly escalated from 2003 – 2007 in a “bubble” that just as rapidly deflated in 2008 – 2009, nearly taking down the entire financial system with it. The recession may have officially lasted only 18 months, but the housing bust had spill-over effects that caused the recession to be deeper and longer lasting than it needed to be.


Many economists believe that rising home values contribute to a “wealth” effect that causes consumers to increase their spending, but this effect also may work in reverse: falling values cause consumers to reign in their spending. And for some in the wake of the Great Recession, this wasn’t just a psychological effect: there was a real loss in wealth. Those who bought at the height of the housing bubble may have later discovered that their mortgage was “underwater,” meaning their home was worth less than the value of their mortgage. Their spending then was necessarily constrained, especially so if they had to work at reduced wages or had lost their job. They couldn’t, for example, just sell their home and move to another region to take a new or better paying job. As a result, the lingering recession in housing, and construction in general, acted more generally as a brake on the subsequent recovery.

 

All of this means that manufacturers and marketers of construction chemicals have been whipsawed in the last decade. “Construction chemicals’’ most generally are considered to be chemical products that are consumed on-site in the construction process. They consist of a mix of both commodity and specialty chemicals that include paint and coatings; adhesives, caulks, and sealants; concrete and asphalt additives; grouts and mortars; polymer flooring; spray foam and insulating materials, and other on-site building materials... 

 

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