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The global economy expanded by 3.2% in 2017 compared to the previous year, which bodes well for 2018. Most of the world’s major economies are experiencing positive growth as we move into the 2nd half of 2018. The International Engineering, Procurement and Construction (EPC) market is estimated to grow to $7.40 trillion by the end of 2018, up from $7.15 trillion in 2017 – an annual increase of 3.5%. The make-up and distribution of this value by region is as follows: The international construction market is forecast to be a $10 trillion market in the next 10 years, a 35% increase.The (5) fastest growing economies are:
2018 Value in Trillions $’s
Asia / Australia & New Zealand
- India 7.2%
- China 6.3%
- Vietnam 6.5%
- Philippines 6.4%
- Indonesia 5.6%
- The prospect of a trade war between China and the USA is a distinct possibility.
- The possibility of a conflict between the USA and North Korea have perhaps dissipated with the future planned meeting between both heads of state in May.
- The political and territorial ambitions of Russia, now that President Putin has secure a new six year term.
- The political infighting and now the Special Counsel directed at President Trump and his possible election campaign ties to Russia, has slowed down his agenda.
- Nobody knows what barrel oil will cost in the next six months, will it be $40 or $70 a barrel, oil prices have been moving upwards in the last four months.
- China’s reclamation and continuing construction projects in the Spratly Islands, a highly disputed area in the South China Sea continues to be a major problem.
2018 % GDP Growth
2018 Inflation %
2018 Unemployment %
Comments on Construction 2018 Future Spending Activity
Construction activity overall in the USA is forecast to increase by 4% to 5% in 2018 over 2017 levels. Commercial / Infrastructure construction gradually improving in all areas of the USA. The USA economy will continue to grow at an improving rate of 2.9% to 3.2% in 2018.
Construction (hotels, offices, shopping malls, institutional work and housing) is steadily improving in all Canadian Provinces. Oil and Gas CAPEX work has started to see a slight pick-up with current oil prices in the $60 to $65 a barrel range.
Lots of labor and economic problems will continue to impact construction activity, however the economy is seeing signs of improvement. GDP is forecast to grow at an improving rate of 2.4% to 2.7% range in the 1st half of 2018.
The economic impact of “Brexit” is still a major issue. The British housing and infrastructure market is now starting to trend upwards as we move into the 1st half of 2018.
Germany is the largest economy in the Euro Zone, slow and steady growth appears to be on the cards for the 1st half of 2018. The German GDP growth is forecast to be 2.2% – 2.4% in the 1st half of 2018.
The French economy is forecast to grow by 1.7% to 2.1% for the 1st half of 2018. Construction activity remains slow; however there are signs of activity in the infrastructure and transportation sectors There are number of major infrastructure / transportation projects in the pipeline that should be constructed in 2018.
The Russian construction market is forecast to experience nominal growth in the Oil / Gas sector and modest growth in the commercial / housing construction sector in the 1st half of 2018, construction work for 2018 World Cup continues. USA and European sanctions have seriously impacted the Russian construction sector in last three years, look for this to continue in 2018.
The Japanese economy is forecast to grow by 1.0% to 1.3% for the 1st half of 2018. The Japanese construction industry continues to see slow but stable growth. What to do about North Korea is a major issue that could eventually impact the economy.
The prospects of a trade war between China and the USA is a distinct possibility in the 1st half of 2018. The Chinese economy is showing some signs of moderating; this has and will impact future construction activity. Add to this the devaluation of the Yuan, the major drop in the stock market and the property “boom” bubble that still is expected to play out and the North Korean impasse points to possible problems ahead for the Chinese construction market. Construction salaries and wages in some of the coastal cities are increasing in the 5% to 10% range. China and India’s border dispute has risen to an uncertain level which could cause problems in 2018
India will continue to be the frontrunner of the Asian economies. Foreign investment is pouring into India as major USA, European and Japanese companies eye India as a major growth country, look for this trend to continue in the 1st half of 2018. Infrastructure (roads, ports, bridges, electrical transmission lines etc.,) accounts for between 50% and 70% of India’s construction sector.