Data Mining August 2011

AggMan Staff | Published on August 1, 2011

Fed grows pessimistic about economy

By George H. Reddin

Momentum for merger and acquisition activity cannot catch a break, and comments from the recent Federal Reserve Board meetings will not help spur on any additional activity.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

The Federal Reserve has grown more pessimistic about the state of the U.S. economy. The Fed said that, while the recovery is continuing at a moderate pace, growth is somewhat slower than expected, and the jobs market is weaker than anticipated. The Fed is now calling for slower economic growth, and higher unemployment and inflation for 2011 and 2012 than in its previous forecast. The Fed projects that it will take years to get back to full employment.

These views have raised fears of the economy falling into another recession, which the Fed has downplayed as it expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline. 0:00 / 3:11 Why Greece won’t default

The Fed also left the fed funds rate near 0 percent, where it has been since December 2008.

Investors thrive on a vision of predictable earnings and an expectation of growth — the market is not there yet.

Recent transactions

Jobe Materials, L.P. has acquired the Las Cruces assets and operations of Certified Concrete Products and Rio Grande Rock, which have been operating in Las Cruces more than 45 years. Jobe Materials, L.P. of El Paso, Texas, was started in 2005 and provides ready-mix concrete, hot-mix asphalt, and aggregates to the construction building industry in the Las Cruces market.

Summit Materials, LLC has acquired Elam Construction, Inc.; Grand Junction Concrete Pipe Co., Inc.; Fischer Quarries, LLC; B&B Resources, Inc.; Triple C Concrete, Inc.; and Wind River Materials, LLC. Combined, the acquisitions add 2 million tons of aggregate, 500,000 cubic yards of ready-mix concrete, and 200,000 tons of asphalt, and contribute about 65 million tons of aggregate reserves to the Summit portfolio.

Elam Construction, based in Grand Junction, Colo., is an aggregates, asphalt, and paving business with operations across the Western Slope of Colorado. Grand Junction Concrete Pipe is an aggregates, ready-mix concrete, precast products, and pipe distribution company also based in Grand Junction. Fischer Quarries operates a quarry in Sedalia, Mo., while B&B Resources is an aggregates and ready-mix concrete producer in Salt Lake City, Utah. Triple C is an integrated ready-mix concrete, aggregates, and precast products business located in southern Idaho. Wind River Materials (formerly Enercrest Products, Inc.) produces aggregates and ready-mix concrete in southwest Wyoming.

Other news

Ozinga Bros., Inc., is considering building a cement plant on Chicago’s Southeast side. Building a plant would create jobs and secure a more reliable supply of cement for Ozinga. Consolidation among cement and concrete producers has made it more difficult for firms without their own source of cement to compete. Ozinga Bros., Inc. has 20 ready-mix plants in Illinois and seven in Indiana.


AGC reports a double-digit decrease in construction spending

Census Bureau data shows that May construction spending totaled $753 billion at a seasonally adjusted annual rate, the sixth consecutive monthly decrease and the lowest figure since 1999, according to a report from The Associated General Contractors of America’s (AGC) Ken Simonson. The May total was 0.6 percent lower than April and 7.1 percent less than a year prior. Public construction fell 0.8 percent for the month and 9.3 percent for the year.

Reports indicate that public investment outlays under the American Recovery and Reinvestment Act of 2009 (ARRA) prevented more dramatic decreases in construction. The Council of Economic Advisors indicated that first-quarter outlays totaled $20 billion, with little direct spending remaining to be obligated. In a May report, the Congressional Budget Office estimated that the ARRA “increased the number of people employed by 1.2 million and 3.3 million.”

While the Bureau of Labor Statistics shows May unemployment rates were lower in 274 of the 372 metropolitan areas, construction employment was up in only 120 of the 337 metro areas for which data is available, down in 162, and level in 55, according to an AGC analysis.



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