Coronavirus Regional Briefing:Western U.S.

Brian Schmidt, Regional EconomistJuly 2020

Regional Focus

ME

RI

MA

VTNH

AL GA

SC

TN

FL

MSLA

TX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

ILIN

MI

OH

WVVA

NC

MD

DE

PA

NY

CT

NJ

Pacific Mountain

KY

HI

0

20

40

60

80

100

120

140

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Pacific

U.S.Mountain

Total Cement ConsumptionIndex, 2000=100

Source: USGS, PCA 3

0

100

200

300

400

500

600

700

800

3/1/2020 5/1/2020 7/1/2020 9/1/2020 11/1/2020

Based on IHME’s estimated infections

which include those not tested as well as

asymptomatic

IHME Projected Daily Infection Rates --Per Capita

Source: IHME, Census, PCA 4

Mountain

Pacific

New Daily COVID-19 Infections per Million of Population (July 14, 2020 Update)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Total Cement Consumption – Western U.S.

Source: USGS, PCA 5

Pacific

Mountain

‘W’ Scenario

‘W’ Scenario

(000 Metric Tons)

Economic Outlook

a

-40%

-30%

-20%

-10%

0%AZ CO ID MT NM NV UT WYMOUNT CA HI OR WA PAC US

Employment Recovery

Source: BLS, PCA

Percent Change in Employment (February through April)

7

0%20%40%60%80%

100%AZ CO ID MT NM NV UT WYMOUNT CA HI OR WA PAC USPercent of Employment Losses Recovered (June from April trough)

Leisure and Hospitality Exposure

ME

RI

MA

VTNH

AL GA

SC

FL

MSLA

TX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

ILIN

MI

OH

WVVA

NC

MD

DE

PA

NY

CT

NJ

HI

Share of Total Nonfarm Employment

Source: BLS, PCA 10-12% 12-15% 15%+<10%

KY

TN

Oil, Agriculture, and Manufacturing Exposure

Oil States Agriculture Manufacturing& AgricultureSource: PCA 9

CO

WA

ID

MT

OR

NV

AZ

CA

NM

UT

WY

• As a whole, the region’s economy is generally diverse

• Not very reliant on energy, agriculture, or manufacturing

• Oil exposure in New Mexico and Wyoming (and to a lesser degree Colorado) represent an area of concern

HI

Construction Non-Exempt Impact

CO

WA

ID

MT

OR

NV

AZ

CA

NM

UT

WY

HI

Source: PCA

• An adverse wrinkle experienced in some markets due to construction not being considered exempt from stay at home orders

• Entire state of Washington as well as parts of California, mainly the Bay area

• Very depressed volumes in April for these areas

Residential Outlook

a

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20

Housing Permits – Western U.S.Seasonally adjusted, year-over-year percent change.

Source: PCA

MountainPacific

12

1.01.52.02.53.0

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

Home Affordability ConcernsHome Price-to-Household Income, SA

Source: NAR, BEA, BOC, Moody's 13

1.01.52.02.53.03.5

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

Denver1.01.52.02.53.03.5

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

Portland

1.02.03.04.05.06.0

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

San JoseSeattle

0

20

40

60

80

100

120

140

160

180

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Residential Cement Consumption – Western U.S.

Source: USGS, PCA 14

Mountain

Pacific

Index, 2000=100

U.S. Annual % Change2020 2021

Mountain 2.0% -0.8%Pacific -8.2% 3.7%

0

20

40

60

80

100

120

140

160

180

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Residential Cement Consumption – Western U.S.

Source: USGS, PCA 15

Mountain

Pacific

‘W’ Scenario

‘W’ Scenario

Index, 2000=100

0

5

10

15

20

25

30

US Mountain Pacific

Potential Shift in Homebuyer Preferences?

Source: PCA, NAR

Metric Tons of Cement Per Housing Unit

SF SF SF

MFMFMF

• 21% of agents reported buyers seeking the benefits of new homes, such as office space or backyards. (Source: NAR Research Group Survey)

• Potential for intrastate moves from urban to suburban/exurban locations.

• A 10% compositional shift from multi to single family would amount to roughly 60k MTs annually in Mountain and 115k MTs in the Pacific.

16

Nonresidential Outlook

a

0%

5%

10%

15%

20%

25%

AZ CO ID MT NV NM UT WY CA HI OR WA

Percent Share of Total Cement

Office, Hotel, and Retail Importance

Office

Hotel

Retail

Source: PCA

0

20

40

60

80

100

120

0

500

1,000

1,500

2,000

2,500

WTI Price (R)

Active Rig Count (L)

Oil & Gas Drilling a Concern in Some States

Source: Baker Hughes Incorporated, EIA 19

0

20

40

60

80

100

120

0

10

20

30

40

50

60

70

80

90

Colorado

New Mexico

Wyoming

Oil & Gas Drilling a Concern for Some StatesAverage Active Rotary Rigs - Total, (#)

Source: Baker Hughes Incorporated

Percent Change Since February:New Mexico -53%Colorado -71%Wyoming -95%U.S. -65%

20

0

100

200

300

400

500

600

700

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Oil Well Cement Consumption – Western U.S.Metric Tons, Thousands

Source: PCA

2016 2017 2018 2019 2020F 2021F 2022F 2023F 2023F 2024F-31% 44% 10% 2% -46% 31% 6% 2% 4% 7%

Oil Share of Total Regional Cement Consumption: 2%

New Mexico: 24%Wyoming: 24%Colorado: 6%

21

0

100

200

300

400

500

600

700

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Oil Well Cement Consumption – Western U.S.Metric Tons, Thousands

Source: PCA

2016 2017 2018 2019 2020F 2021F 2022F 2023F 2023F 2024F-31% 44% 10% 2% -46% 31% 6% 2% 4% 7%-31% 44% 10% 2% -55% 8% 30% 16% 12% 7%

Baseline“W”

22

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2010 2013 2016 2019 2022 20250

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2010 2013 2016 2019 2022 2025

Nonresidential Cement Consumption – Central U.S.

Source: PCA 23

Mountain Pacific

Metric Tons (000s)

2020 2021 2022 2023 2024 2025-3.5% 0.8% 2.1% 1.8% 2.2% 2.5%

-6.4% -6.4% 6.0% 3.4% 3.6% 3.3%

2020 2021 2022 2023 2024 20254.2% -1.3% 0.8% 1.4% 1.8% 2.4%

3.5% -2.2% 0.7% 1.5% 2.5% 3.4%

Baseline Scenario ‘W’ Scenario

Public Outlook

a

ME

RI

MA

VTNH

AL GA

SC

TN

FL

MS

LATX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

ILIN

MI

OH

WVVA

NC

MD

DE

PA

NY

CT

NJ

1% or less 5% to 10% Greater than 15%

Rainy day balances as share of general fund expenditures

Source: NASBO Fall 2019 Fiscal Survey of the States

State Rainy Day Funding – FY2020

KY

Current National Average: 7.6%

Prior to Great Recession: 4.5%

2% to 5% 10% to 15%

Kansas and Illinois effectively have $0 balances, Pennsylvania and New Jersey are roughly 1%

Oil revenue reliant states of New Mexico, North Dakota and Wyoming have respective balances of 27%, 30% and 109%

25

0

5

10

15

20

25

30

35

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Cents Per Gallon

State Weighted Gas Tax

Federal Gas Tax

Source: Federal Tax Administrators, FHWA, PCA 26

States Have Been Increasingly Less Reliant on Federal Funds

-60%

-50%

-40%

-30%

-20%

-10%

0%AZ CO ID MT NM NV UT WYMOUNT CA HI OR WA PAC US

Reduction in Vehicle Miles Traveled

Source: FHWA, PCA

Percent Change in Vehicle Miles Traveled (Apr 20/Apr 19)

27

-60

-50

-40

-30

-20

-10

0

10

02/21/20 03/21/20 04/21/20 05/21/20 06/21/20

Workplaces: Mobility trends for places of work

Employees returning to Work…

Source: Google Mobility Report, PCA 28

Mountain

Pacific

Percentage change from baseline visits—Workplace

-60

-50

-40

-30

-20

-10

0

10

20

02/21/20 03/21/20 04/21/20 05/21/20 06/21/20

Retail & Recreation: Mobility trends for places like restaurants, cafes, shopping

centers, theme parks, museums, libraries and

movies theaters

Consumers Once Again Showing Apprehension

Source: Google Mobility Report, PCA 29

MountainPacific

Percentage change from baseline visits—Retail & Recreation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

AZ CO ID MT NV NM UT WY CA HI OR WA

States with High Sales Tax Exposure at Risk

Source: Census State Government Tax Collections Report, PCA

Sales tax as a share of total tax collections

30

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2007 2010 2013 2016 2019 2022 20250

1,000

2,000

3,000

4,000

5,000

6,000

2007 2010 2013 2016 2019 2022 2025

Public Cement Consumption – Western U.S.

Source: PCA 31

Mountain Pacific

Metric Tons (000s)

2020 2021 2022 2023 2024 20250.6% -2.6% 1.8% 1.9% 2.1% 2.3%

-0.1% -3.6% 1.7% 2.1% 2.8% 3.5%

2020 2021 2022 2023 2024 20250.2% 0.4% 1.3% 1.6% 1.8% 2.1%

-0.7% -0.8% 1.2% 1.9% 2.7% 3.4%

Baseline Scenario ‘W’ Scenario

Regional Cement Trends: Through 2021

ME

RI

MA

VTNH

AL GA

SC

TN

FL

MS

LATX

OKNM

KS

MN

IA

MO

AR

WY

CO

ND

SD

NE

WA

ID

MT

OR

NVUT

AZ

CA

WI

ILIN

MI

OH

WVVA

NC

MD

DE

PA

NY

CT

NJ

5% or Greater Growth

+2% to -2%

-2% to -5%

Based on change in cement consumption between 2019 to 2021

KY

Source: PCA 2020 Summer State Forecast 32

2% to 5%

5% or Greater Decline

Coronavirus Regional Briefing:Western U.S.

Brian Schmidt, Regional EconomistJuly 2020