USA, CANADA and MEXICO are forecast to see overall 2.4% GDP Growth for the balance of 2019:

The USA economic forecast remains somewhat robust, the USA GDP growth rate is still forecast to be in the 2.9% to 3.2% range for the balance of 2019. Some economic commentators are bringing up the likelihood that the USA will move into a recession in 2020 / 2021.

Construction costs in some US cities such as Houston, New York, San Francisco & Orlando have risen between 4% and 6% in the last 12 months, a tight labor market and a busy marketplace are the drivers of this situation. Escalating labor costs and the shortage of skilled workers will remain a major issue for the 2nd wave of Ethylene, LNG and Chemical facilities located in the US Gulf coast that will be constructed in the next 24 to 36 months.

Modular, pre-assemblies, offsite pipe fabrication & pre-fabricated buildings are becoming more & more the norm in the US / North American Construction Industry, look for this trend to continue in 2019 & beyond. Modularization many times is cost effective versus “stick built” construction methods.

The Trump administration has extended the March 1st cutoff date to increase import duties / tariffs on Chinese goods, quoting ” significant advancement” has been made between the two nations.

The Trump administration is meeting opposition from Congress and the Senate on transferring funds to build the southern border wall, some of this wall is currently being constructed. There is a possibility that up to $10 billion of approved defense appropriations will be transferred to construct the southern border barrier, stay tuned on this issue.

A number of US producers of steel and aluminum have decided to build or expand the production facilities, this perhaps is one of the benefits of the US imposed tariffs on steel and aluminum.

The last two years has seen a construction boom in the US, this growth has been fueled for the most part by new housing, apartments, hotels / motels, offices, institutional, education, healthcare facilities, infrastructure and oil and gas facilities. Overall, the US construction growth is starting to see some signs of a slowdown compared to the last two years. The overall US construction sector is forecast to grow by more than 2% to 3% per year for the next two years, slower than 2017 / 2018 levels, but still reasonable growth.

The US Commercial construction sector encompassing single family homes, apartments, offices, hotels, healthcare facilities is forecast to grow by 2.5% to 4.5% in 2019 over 2018 levels and will experience a steady improvement in the 2nd Q of 2019 and beyond. Consumer confidence continues to remain positive in the US, even with the gyrations seen on Wall Street. Industrial construction such as refineries, gas facilities, chemical and power plants are forecast to see steady growth in the 2% to 3% range in 2019 over 2018. Infrastructure such as transportation, water supply and waste water construction and the like is forecast to grow by 3% to 5% in 2019 over 2018 levels.

The US Gulf Coast is the # 1 construction sector, this region is extremely busy with ongoing oil / gas, Export LNG facilities, Ethylene and infrastructure projects, currently employing more than 35,000 construction workers. The US Gulf Coast (Texas, Louisiana and Alabama region) has more than $100 billion of CAPEX projects related to a dozen or more new major Ethylene, LNG Export Terminals, Ammonia / Fertilizer Plants and Refineries being currently constructed or are in the front end planning stage to start construction in the next 12 to 24 months. This huge amount of work is placing a huge strain on contractors to find and keep skilled workers.

New US single-family homes are forecast to have a good 2019, increasing by 4% to 6% over 2018 activity. 875,000 Single-family housing units are forecast to be built in the USA in 2019, however this number is forecast to drop to between 750,000 & 800,000 in 2020 as mortgage rates increase & the USA economy starts to slow down.

Construction work related to new and refurbished airports and transportation facilities in the US is another area that is experiencing significant growth – new terminals, runways, roads, bridges, depots / workshops, maintenance facilities, new rail track and rail connections are being announced every month. Power and utility projects is another construction sector experiencing growth uptick in all areas of the US, look for this to continue for the rest of 2019.

US new construction starts in 2019 are forecast to increase by 4% to 5% from 2018 levels. The US economy continues to be the front runner of the 35 OECD major industrialized countries with 2.9% to 3.1% projected growth for the remainder of 2019.

Construction materials are projected to increase between 2.2% and 2.5% in 2019 over 2018 levels. Cement (both bulk and bagged) are forecast to increase on average by 1.2% over 2018 levels. Steel shapes and piping products are projected to rise by 2.7% over the last twelve months. Timber and plywood are projected to increase by 5% to 7.5% over 2018 levels in 2019. Ready-mixed concrete costs have increased by 2.5% to 3.5% in the last twelve months, look for this to moderate downwards to 1.5% to 2.5% in the 4th Q of 2019. Copper products are forecast to rise by 2.6% to 3.6% in 2019 and PVC pipe is estimated to increase by 1.8% to 2.3% in 2019. Skilled and Un-Skilled labor costs are projected to increase by 2.2% to 2.6% in 2019 over 2018 levels. Drywall related costs in 2019 are projected to rise by 3.7% to 4.5% over 2018 pricing levels, due in the main part to the noteworthy improvement in the US “new” housing market. Look for many of these costs to moderate in the 4th Q of 2019 as construction activity “cools down”.

The US overall unemployment rate in the 2nd Q of 2019 is forecast to be in the 3.7% to 3.9% range, a 23 year low. US construction unemployment fell to 4.2% in February, down from a 7.3% rate from nine months previously. The US is currently experiencing a shortage of skilled workers (especially electrician, welders and pipefitters), specifically in Texas and Florida. This problem will get worse in the next five to ten years as a high percentage of these skilled workers will be retiring.

The US population is currently 328 million, this number in projected to increase to 338 million in the next three years (a 3% increase), driving the need for more houses, schools and infrastructure projects. Steel and aluminum products pricing could see a major price hike of between 4% and 8% in the 2nd Q of 2019 now that the US has imposed tariffs on imported steel and aluminum. Note that these cost increases are working their way through the procurement chain.

There is a major need in the US to build highways, bridges and tunnels and to significantly modernize the overall highway and interstate system, this situation will be one of the key elements that drives the construction industry forward in 2019 and 2020.

The US construction industry will keep on its’ growth cycle for the 2nd half of 2019. The industry needs more construction professionals, skilled and non-skilled workers, this will result in labor and material shortages that will drive salaries, hourly wage rates and material costs higher. We are starting to see US Engineering and Construction Management firms raising their billing rates and profit margins, look for costs of these services to increase by 3% to 6% in 2019 over 2018 rates.

There are currently 10 + US LNG export terminals under environmental review, these CAPEX projects represent more than $35 billion in EPC services that if constructed will employ up to 50,000 construction workers between mid-2019 to late 2022.

In 2019 and 2020 the US will see a number of Chemical Facilities, Tire Production Factories, Aluminum Mills, Chemical Manufacturing Complexes, Industrial Gas Plants, Power, Pipelines, Mining & Metals EPC projects commence construction. These projects will (for the most part) be located in West Virginia, Texas, Ohio, Tennessee, Kentucky, Indiana & Pennsylvania. Escalating interest / borrowing rates are a significant risk to the USA commercial / home building community in 2019.

A new flat screen manufacturing facility in Wisconsin will be producing flat-screen panels and components by the end of 2020, construction will be starting in late spring, the estimated cost this facility is more than $10 billion.

The population of Canada is growing; this growth will have a positive impact on new and existing homes / apartments, health care facilities, hotels, retail and office construction. Overall, Canadian construction (with the exception of Oil / Gas construction) is primed to have a decent 2nd Q in 2019. The latest 2019 GDP growth forecast is 1.7%, similar to a year ago. Inflation is forecast to be in the 1.9% to 2.2% and unemployment is slowly increasing and set to finish 2019 out in the 5.7% to 5.9% range. The Canadian construction workforce is estimated to be in the range of 1.35 to 1.45 million range, construction unemployment is between 6.9% and 8.1%.

Canada’s Prime Minister Trudeau’s government has been struggling over claims of unethical actions connected to Canadian government contracts in North Africa. These allegations have been a major political setback to Prime Minister Trudeau who is hoping to be re-elected later this year. Canada’s overall economy is slowly moving along in a positive direction, slow and steady is the best way to describe its progress. Canada’s infrastructure has had a good run in the last 5 years, lots of new roads and bridges and other infrastructure projects have been completed. The Canadian construction industry is expected to advance over the next two to three years to a market in excess of C$300 billion. The Canadian Dollar has continued to weaken against the US dollar, (1.33 to the US Dollar at the end of 3/22/2019), the strengthening Oil / Gas and commodities markets around the world has not helped the Canadian Dollar, which is hard to explain.  Oil related construction in Alberta has slowed down appreciably in the last 18 – 36 months, however a couple of projects have been approved in the last month or two with oil starting to trend upwards to the $55 to $66 a barrel range, this could be good news for the Canadian oil patch / EPC sector.  Canadian construction costs, labor and materials are forecast to stay relatively flat rising no more than 2.4% to 2.7% in the 2nd Q of 2019. Canada’s expanding population, its flourishing housing market and internal industry production / manufacturing endeavors will be the primary actions that supports this growth. The Canadian construction market is basically slowly moving forward, look for this situation to continue for the remainder of 2019. In November 2018, the US, Mexico, and Canada endorsed a new trade accord titled the US-Mexico-Canada Agreement (USMCA), this new trade arrangement will transfer some automobile vehicles and components produced in Mexico to the US and open up dairy products from the US into Canada. USMCA also opens the way for the US to remove 25% steel and 10% Aluminum import tariffs it placed on Canada in 2018.

Mexico has a new President Mr. Andrés Manuel López Obrador and a new trade agreement in place with the US. The Mexican construction market is set to expand by 2.5% to 3.2% in 2019, infrastructure and overall industry growth will be the sectors that drive this growth. Mexico recently announced it would build a new 380,000 B/D refinery costing $8 billion.  Mexico is now a larger economy than Brazil, the new US-Mexico-Canada Agreement (USMCA) between Mexico and the US agreement could be a big boost to the Mexican economy and the construction sector. The Mexican Peso is currently trading at 18.84 Pesos to the US Dollar (3/21/2019), a drop of 10% since the 2016 US election. While a cheaper Mexican Peso may seem to boost exports to other countries and tourism from the USA, it would make imports into Mexico more expensive and it could possibly increase the current inflation rate to over 4 % in 2019. Mexico‘s GDP in 2019 forecast is 1.9%, unemployment is projected to be 3.6% to 3.8% in 2019.

2019 Global Construction Costs Yearbook

Compass International's 500+ page publication provides “current” detailed information on construction cost specific to 101 countries worldwide.

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