Industrial / Commercial Global Construction Newsletter
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Q3 2024
Executive Summary:
Global construction markets are forecast to grow in the next 3rd and 4th quarter of this year, this growth will be marginal. However, this is a positive trend when looking back over the last three years. Infrastructure and industrial related construction will be the construction sectors that drives this growth.
Evaluating the Global Construction Industry in 2024 is not any easy task! However, a number of experts / economists and Compass international are reasonably bullish on the remainder of 2024 Construction prospects.
The chances of a full-blown global recession /economic downturn remains reasonably high as move into the 3rd Q of 2024. On the positive side, the Global Construction sector is showing some signs of growth and is (for the most part) positioned for a recovery from the last lackluster COVID / supply chain years. Rising tensions in the Middle East and the ongoing Russia vs. Ukraine conflict / standoff are potential road blocks to future growth in 2024. However, the Global Construction Industry is resilient and is forecast to reach $11.5 trillion by the years’ end in 2024 and to possibly hit $14 trillion by 2026. Difficult conditions remain in place, the Global Construction industry will continue to face challenges in 2024. The Global Construction industry is expected to grow between 2.8% and 3.4% in the same period.
Some good news – it appears that the US economy and construction sector will not experience a full-blown economic recession as we move further into 2024. The Global energy transition and the transition from fossil fuels will continue to have a major impact on the Global Construction industry now and in the future.
There is a new cold war between China and the USA. China’s tone has become more and belligerent in the last 6 to 12 months. This competition could be a major problem in 2024 and beyond. The intensifying rivalry between the USA and China looks like it is a permanent challenge to the global economy and construction sector. The following is the distribution of the Global Construction market by geographical location:
# | Region | 2024 Value in Trillions $’s |
1 | North America (USA / Canada / Mexico) | 3.06 |
2 | South America | 0.93 |
3 | Western Europe | 2.41 |
4 | Eastern Europe | 0.78 |
5 | Middle East / Africa | 1.29 |
6 | Asia / Australia (China / India / Japan / Australia / New Zealand / Other S.E. Countries) | 3.03 |
Total | 11.50 |
The countries that will experience some of the highest GDP growth in the 3rd Q of 2024 include:
Guyana, Ethiopia, Niger, Senegal, Libya, UAE, Cote d’Ivoire, Philippines, India and Vietnam.
Note, the vast majority of these countries are large exporters of Oil / Gas, Minerals and Timber products.
The countries that are seeing increased / improved construction activity include Saudi Arabia, India, China (getting back after the nationwide COVID shutdowns), Vietnam and some of the smaller SE Asia nations.
For the best part of 3 years, the Global Construction industry has faced the following challenges:
- Supply chain issues / interruptions, causing delivery delays
- The shortage of skilled construction labor & sub-contractors especially in the USA & Canada
- High oil & gas prices (gasoline / petrol & diesel cost have increased by as much as 25% in the last 18 months)
- High inflation rates
- Construction material costs have increased by close to 20% in the last 24 months, however we are seeing this high percentage starting to moderate in the last 3 months.
- The ongoing Russia – Ukraine conflict has created major problems in Europe & around the world.
- Increased tensions in the Middle East after the Hamas attack on Israel and Israel’s response
- In Asia, possible flash points remain in the South China Sea – China – Taiwan / the Philippines, North Korea & the continuing India vs. northern China border standoff.
Hopefully, some of these issues will be resolved in 2024 and beyond. The vast majority of construction bulk materials, such as timber / plywood & OSB, steel products (rebar & structural steel), copper products, roofing, cement, concrete and plumbing & electrical components have started to decline from their record high prices experienced back to Pre-COVID levels, some of these bulk construction materials have declined by as much as 10% to 15%. Unfortunately, most construction bulk materials and to some extent construction related equipment such as HVAC components, pumps, electrical equipment are still 5% to 15% or more expensive than they were 12 months ago.
Transportation / ocean freight costs have increased significantly due to the continuing missile attacks on ships in the Red Sea and Indian Ocean.
Inflation / Escalation remains reasonably high in just about all countries; however, it is starting to moderate in most countries.
The increased utilization of Artificial Intelligence (AI) & data science has the ability to considerably impact Construction and Project Management practices and Project Execution methods. Estimating, planning and procurement current routines could be transformed in as little as 5 years, if the pace of utilization of AI continues at its’ current pace. AI will be present in the construction industry with both short-term challenges and future growth opportunities in the years ahead. We will hear much more on the use and application of AI related to Engineering, Procurement and Construction in the coming months and years. More and more companies are implementing AI technology, AI will continue to evolve and improve. Concerns abound on AI’s impact on current and future employment and its’ long-term impact on the current workforce. Artificial Intelligence (AI) is an extremely powerful technology / tool that is working in construction offices and sites around the world. AI assists businesses streamline and quicken and optimize project completions.
The USA CHIPS Act has provided more than $35 billion in future grants / funding schemes to USA and foreign semiconductor / microchip producers that establish facilities in the USA.
The continuing use of pre-assemblies, pre-fabrication and modular construction methods is gaining wider application that can optimize field labor, constriction costs and schedules.
3rd Q of 2024 Construction Outlook for Major Countries:
Countries | 3rd Q 2024 % GDP Growth | 3rd Q 2024 Inflation % | 3rd Q 2024 Unemployment % | Comments on Construction in 3rd Q of 2024 Future Spending Activity |
USA | 2.8 – 3.3 | 3.2 – 3.6 | 3.9 | The good news for the US construction sector continues, we have seen various announcements of plans to build a number of Electrical Vehicle Manufacturing / Battery Facilities, Semi-Conductor / Computer Chip Facilities, Call Centers, Logistical Centers and Fulfillment type facilities in many regions across the country. The USA is making noteworthy advances over some of its economic rivals with the CHIPS / Science act passed in mid-2023 and costing more than $50 billion that funds various computer chip manufacturing / high-tech facilities. The USA construction sector is experiencing a boom in new EV manufacturing& battery production facilities along with computer chip facilities & call centers that have recently been announced. This surge in spending is expected to continue into the 2nd half of 2024 and possibly beyond. Extreme shortages of skilled labor such as Pipefitters, Welders, Electricians and Instrumentation technicians continue to be a serious problem to the US construction industry. US construction inflation will continue to remain in the 2.6% to 3.4% range for the next 3 to 6 months. High interest / borrowing rates will continue to negatively impact the US Commercial / Housing sector. |
CANADA | 0.7 – 1.1 | 2.9 – 3.1 | 6.1 | The Canadian infrastructure, civil engineering, mining and Oil & Gas construction sectors are experiencing a pick-up as we move further into 2024. Ontario, British Colombia and Quebec appear to the busiest Canadian Provinces for construction, with a mixture of Commercial, Infrastructure, Industrial and Residential construction activity. The Canadian unemployment is currently at 5.7%, with construction a little higher at 6.8% to 7.1% |
BRAZIL | 2.1 – 2.7 | 4.2 – 4.5 | 7.6 | The Brazilian construction sector is estimated to be a $125 to $145 billion market or close to 6.5% of the country’s GDP. Not a lot to report on future 2024 construction activity, Brazil is still in a recovery mode after 2 tough years related to COVID. Brazil’s political and economic situation appears to be improving. Inflation / escalation inflation in Brazil is running close to 3.4% which is a big improvement to 3 months back |
UNITED KINGDOM | 0.2 – 0.4 | 2.2 – 2.7 | 4.5 | A General Election in early July could turn out to be a positive result for the UK’s lackluster construction sector. Construction activity in and around London is still reasonably active. In the UK, the thinking is that the commercial construction sector is recovering with prospects for 2024 being better than last year. So far 2024 has not been good year for construction in the UK, house building is down by more than 8%, the high speed HS2 rail link from London to Birmingham HS2 has been significantly scaled back, and plans to build new NHS hospitals have been put on hold. |
GERMANY | 0.2 – 0.4 | 2.4 – 2.9 | 3.2 | The German construction industry is forecast to see zero growth in 2024 German CAPEX costs are forecast to decline by 5% over the previous year. Germany has just signed a major deal with Norway to purchase a large amount of gas over the next 20 years valued at many billions of dollars. |
FRANCE | 1.1 – 1.4 | 2.5 – 2.9 | 6.9 – 7.4 | A General Election in next couple of months could turn out to be a “shot in the arm” for the unexciting / waning French construction sector. Numerous French CAPEX projects were put on hold in 2023 due to the Russian / Ukraine conflict. Construction activity in France is gradually starting to improve. The French Government is projected to increase future expenditures on new and refurbished roads, bridges, ports / airports and rail facilities. The 2nd half of 2024 is shaping up to be a much better period that the 3 previous years for the French construction sector. France’s inflation rate is reasonably elevated at 4.5%, look for this rate to start to trend downwards in the next 3 months. |
RUSSIA | 2.9 – 3.7 | 7.7 – 7.9 | 2.4 – 2.9 | Unfortunately, the Russia-Ukraine conflicts has impacted the Global Economy and Global Construction Sector, look for this problem to continue until a peaceful solution can be found. Russia suffered a major blow on 3 / 24 with the terrorist attack on a Moscow concert hall attack losing 130 + unemployment is only 2.9%, it would appear that Russia is set to continue its conflict with Ukraine for perhaps the next 6 months or longer. |
JAPAN | 0.9 – 1.1 | 2.1 – 2.6 | 2.3 – 2.6 | Japan’s construction industry is forecast to grow by 1.5% to 2.5% in 2024 very similar to previous years. Japan’s construction industry for the sixth year continues to experience slow or minimal growth in its civil / infrastructure, home building, commercial, institutional and industrial sectors, perhaps mirroring Japans steadily declining and aged population. |
CHINA | 4.4 – 4.8 | 1.1 – 1.3 | 5.7 – 6.2 | China has some challenges that have slowed down the overall economy and construction sector. However, GDP growth is still reasonably high at 4.6% The construction sector in China is slowing down as we move further into 2024, it appears that the overall economy is facing challenges. China the world’s 2nd largest economy is still dealing with the adverse impact of the COVID virus, the demand for new housing, together with the weakness pre-owned property prices and less demand for Chinese products / exports around the world are the basic reasons for this rapid slowdown in China. 2024 will be a less than stellar year for the Chinese construction sector. China’s Government reported inflation of 0.5% in 2024 which is very low compared to other major countries, this rate is possibly open to interpretation similar to the low COVID casualty rate reported by China, some economist believes the real rate is between 0.8% and 1.2%. |
INDIA | 6.4 – 6.8 | 4.9 – 5.6 | 6.8 – 7.3 | India’s construction sector has been growing at a record pace in the last 5 years. India is set to become the 3rd largest Construction Market by 2026 only trailing the USA and China, will we see India overtake China in the next decade, stay tuned. India has overtaken China in as the world’s most populated country in 2024, with a population of 1.45 billion. India and China are serious rivals, both countries have stationed a significant number of troops on the disputed border region that could turn out to be a “ticking timebomb” now and in the future. India will experience solid growth in 2024, a high GDP of perhaps more than 8% and moderating inflation at less than 5%, the mood in India’s construction sector is upbeat for at least the next 3 to 5 years. The Indian construction market is estimated to be $750 billion, or close to 11.5% of India’s GDP, construction is one of India’s major industries, employing millions of workers. |
3rd Q 2024 Prices at a Glance:
- Forecast Cost of a barrel of Crude Oil: $80 – $90
- Forecast of Euro / US $ Exchange Rate: 0.91 – 0.95
- Forecast of UK Pound / US $ Exchange Rate: $1.21 – $1.27
- Forecast of Copper per pound: $4.25 – $4.45
- Forecast of Gold per Ounce: $2,280 – $2,350
- US Construction Material Inflation (Basket of 10 construction materials): +2.9% – 3.5% – Average +3.2%
