NORTH AMERICA (USA, CANADA and MEXICO) is forecast to see overall 2.4% GDP Growth in 2019:
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 the 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, 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 1st Q of 2019 and beyond, consumer confidence continues to remain positive, 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 region in the US. 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 are currently being 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 5% to 8% over 2018 activity. The forecast for new home sales is in the 850,000 to 1,000,000 units for 2019, up significantly from a couple of years back, recent indications are that this increase is starting to moderate.
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 track and rail connections are being announced every month. Power and utility projects are another construction sector experiencing growth uptick in all areas of the US, look for this to continue in 2019.
Since these new US imposed tariffs mentioned above have been introduced a number of US based steel and aluminum producers have been “inundated” with new bidding opportunities from both domestic and international companies, this could pave the way for the construction and expansion of new steel and aluminum production facilities in the US in 2019. The factors that are driving the growth in the US construction sector are increased consumer spending, new housing starts, tax reductions and a renewed confidence in the future.
US new construction starts in 2019 are forecast to increase by 5.5% from 2018 levels. The US economy continues to be the front runner of the 35 OECD major industrialized countries with 3.1% to 3.3% projected growth going into 2019.
Construction materials are projected to increase 2.8% in 2019 over 2018 levels, Cement both bulk and bagged are forecast to increase on average by 1.1% over 2018 levels. Steel shapes and piping products are projected to rise by 2.8% over the last twelve months. Timber and plywood are projected to increase by 5% to 7% over 2018 levels in 2019. Ready-mixed concrete costs have increased by 2.5% to 4.2% in the last twelve months, look for this to moderate downwards to 1.5% to 2.5% in 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 3.9% to 4.9% over 2018 pricing levels, due in the main part to the noteworthy improvement in the US “new” housing market.
The US overall unemployment rate in the 1st Q of 2019 is forecast to be in the in the 3.6% to 3.8% range, considered to be a record low. US construction unemployment fell to 3.9% in September, down from a 7% rate from nine months previously. The US is currently experiencing a shortage of skilled workers (especially electrician, welders and pipefitters), especially in Texas and Florida.
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 5% and 10% in the 1st Q of 2019 now that the US has imposed tariffs on imported steel and aluminum. 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.
The US construction industry will keep on its growth cycle in 2019, the industry needs more construction professionals (both skilled and non-skilled workers), this will result in labor and material shortages that will drive salaries, hourly wage rates and material costs higher……. look for inflation to rear its ugly head again in 2019. 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, an impediment to all these facilities coming to online is the potential of a 25% Chinese tariff on US exports of LNG. US Natural Gas / Shale Oil / Ethane / LNG exports to Europe and Asia are projected to grow substantially over the next decade or two as US shale oil and gas production increases, possible Chinese tariffs of 25% could be challenge to this growth, however US gas prices are lower than most of its competitors, so this problem could be a non-issue.
In 2019 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.
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. 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, (1.34 to the US Dollar at the end of December), 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 $70 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 2.5% to 2.8%.in the 1st 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 moving into 2019. In November, 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.
The population of Canada is growing; this growth will have a positive impact on New and Existing Homes / Apartments, Health Care, Hotels, Retail and Office construction. Overall, Canadian construction (with the exception of Oil / Gas construction) is primed to have a decent 1st Q in 2019. The latest 2019 GDP growth forecast is 2.1%, similar to a year ago, inflation is forecast to be in the 2.4% to 2.6% 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%.
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 20.15 Pesos to the US Dollar (12/15/2018), a drop of 12% since the 8th November 2016 USA 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 2019 forecast is 1.9%, unemployment is projected to be 3.5% to 3.7% in 2019.
