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Sept. 23, 2019 – Two key industry economic markers hit on the same day. USGS reported that an estimated 680 Mt of total construction aggregates was produced and shipped for...


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Why Sentiment Drives Our Entire Economy

By Pierre Villere

Over the course of the last several months, I have been in discussions with the fine editors at several SEMCO Publishing titles, including this magazine. After a decade and a half of writing about the construction materials industry, I have expanded my editorial pursuits to include this excellent publication, as well as its sister title, Concrete Products.

I can’t tell you how excited I am to be part of a publishing philosophy that places great value on traditional print, despite the ever-growing march of digital into all corners of our lives. So, with this, my inaugural column, I am happy to introduce myself to all of you, and to share my view of the business of our industry in both this magazine and in the accompanying digital e-newsletters each month.

Economic Winds. Our firm has a national practice in the construction materials industry, with a focus on aggregates in particular. As mergers and acquisitions advisors, we have to pay careful attention to the economic winds, as a strong headwind can slow our industry.

We became well-known for calling the Great Recession as early as the spring of 2007, when our grass-roots touch with clients across the country revealed big, black clouds on the economic horizon that we knew would have a big impact on our industry … although we had no idea it would be so bad for so long. But we saw it coming, and publicized it widely.

So, what is our secret sauce for measuring the ebbs and flows of our cyclical industry? Sentiment. I have written many times about consumer sentiment, which is the backbone of our economy. When consumers feel good, they spend more freely, propelling our economy ever higher, as the American consumers represents fully 70% of annual Gross Domestic Product (GDP).

This sentiment, or confidence, is self-fulfilling. Back in the Great Recession, consumers saw family, friend and neighbors losing jobs, companies announcing layoffs, and home foreclosures everywhere. Sentiment plunged.

But as the economy slowly recovered, so did sentiment. Over time, all those family members, friends and neighbors become employed, some enjoyed raises and promotions, companies they worked for resumed hiring, and the consumer felt good. They bought cars, appliances, and yes, they found a way to qualify for a home mortgage to replace that foreclosed house from years earlier.

Sentiment and Confidence. Sentiment is defined in the dictionary as “an attitude toward something; regard; opinion; a mental feeling; emotion.” Confidence is much the same, defined as “full trust; belief in oneself and one’s powers or abilities; self-confidence; self-reliance; assurance.” The words are almost synonymous.

There are two organizations that track sentiment and confidence. The University of Michigan calls theirs the Consumer Sentiment Index, which dates back to 1966, and was established at 100. Separately, the Conference Board, a non-profit business group, surveys their corporate membership for their own Consumer Confidence Index. Both compile their data monthly, and track remarkably similar paths. Their respective results almost never diverge.

The history of measuring sentiment is an interesting one to study. On the heels of the long economic expansion of the 1990s, the indexes peaked in late 1999. Then two shoes dropped:

  • The first was the bursting of the Dot Com bubble, which left consumers rattled as they saw the gains in their 401-Ks decimated by the implosion of the Internet frenzy.
  • The second was the tragedy of 9/11 – this double punch resulted in the sentiment numbers falling from 112 in late 1999 to 81.8 by September 2001. This locked up consumers’ wallets, and the nation fell into recession. Things improved slowly, but then the onslaught of the Great Recession in the fall of 2008 started another slow slide.

But today, the number has hit as high as 100 this past fall, and hovers in the mid-90s today, so consumers are nearing the all-time high in confidence levels, despite the often-negative bombardment of real-time information through all manner of digital channels that did not exist in 1966.

Finger on the Pulse. As I write about the aggregates industry, I will try not only to keep my finger on the pulse of the current business climate, but also hope to be a sentinel for any downdrafts in our economy. This will help producers plan for their future, good times and bad.

In closing, I want to thank our editor, Mark Kuhar, for inviting me to join this great publication, which I have admired for years. I hope you, our readers, will find my monthly contributions to be interesting and informative.

PGV headshot 2016Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers and acquisitions. He has a career spanning almost five decades, and volunteers his time to educate the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at This email address is being protected from spambots. You need JavaScript enabled to view it.. Follow him on Twitter @allenvillere.