USA, CANADA & MEXICO are forecast to see overall 2.3% GDP Growth for the balance of 2019:
The US, Mexico & Canada have after a period of close to 12 months ended imposing import tariffs on steel 25% & aluminum 10%, the tariffs were finally removed in late May.
President Trump reached an agreement with Mexico to avoid US economically damaging 5% tariffs on Mexican goods. Mexico will send 6,000 troops to its southern border to stop illegal migrants from Honduras, Nicaragua & Guatemala from travelling through Mexico to the US border.
The U.S. House of Representatives has recently approved funds totaling more than $19 billion for disaster assistance, the money will be spent on infrastructure work related to storm / hurricane damage that occurred in May & June in Mid-West states.
Construction unemployment has reach its lowest level in almost 20 years, currently U.S. construction unemployment is between 3.8% & 4.5%.
Repairs, modifications & upgrades to the existing US / Mexico border barrier worth more than $1.5 billion are currently proceeding.
US construction organizations are optimistic for about future infrastructure engineering & construction activity in 2019 & 2020. President Trump continues to push his plans for a $1 trillion infrastructure program over the next 10 years.
The US economic forecast remains somewhat robust, the US 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% & 6% in the last 12 months, a tight labor market & a busy marketplace are the drivers of this situation. Escalating labor costs & the shortage of skilled workers will remain a major issue for the 2nd wave of Ethylene, LNG & 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 is meeting opposition from Congress & 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.
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 & oil / 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 & will experience a steady improvement in the 2nd half of 2019 & beyond.
Industrial construction such as refineries, gas facilities, chemical & power plants are forecast to see steady growth in the 2% to 3% range in 2019 over 2018. Infrastructure such as transportation, water supply & waste water construction & 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 & infrastructure projects, currently employing more than 35,000 construction workers. The US Gulf Coast (Texas, Louisiana & 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 & Refineries that 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 & 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 US in 2019, however this number is forecast to drop to between 750,000 & 800,000 in 2020 as mortgage rates increase & the US economy starts to slowdown.
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 3.3% projected growth for the remainder of 2019.
Construction work related to new & refurbished airports & 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 & rail connections are being announced every month. Power & 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.
Year to Year increases (2018 – 2019)
- Basket of (12) Construction Materials 2.2% – 2.6%
- Skilled Labor costs 1.8% – 2.5%
- Unskilled labor costs 1.6% – 1.9%
- Construction Professionals 1.5% – 2.5%
- Stone / Engineered fill 1.2% – 1.5%
- Cement 8% – 11%
- Ready Mixed Concrete 3% – 4%
- Structural Steel 2% – 3.5%
- PVC piping 0.5% – 1.5%
- Carbon Steel products 1.5% – 2.5%
- Stainless Steel products 1.7% – 2.7%
- Rebar 2.5% – 4.5%
- Timber products / Plywood / Door & Windows1.5% – 3.5%
- Drywall products 2.5% – 5%
- Ceilings / Flooring products 1.3% – 1.6%
- Paint / Coating products 1.2% – 1.8%
Construction unemployment has reach its lowest level in almost 20 years, currently U.S. construction unemployment is between 3.8% & 4.5%. The US is currently experiencing a shortage of skilled workers (especially electrician, welders & pipefitters), specifically in Texas & 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 330 million, this number in projected to increase to 340 million in the next three years (a 3% increase), driving the need for more houses, schools, hotels, offices & related infrastructure projects.
There is a major need in the US to build highways, bridges & tunnels to significantly modernize the overall highway & interstate system, this situation will be one of the key elements that drives the construction industry forward in 2019 & 2020.
The US construction industry will keep on its growth cycle for the 2nd half of 2019, the industry needs more construction professionals, skilled & non-skilled workers, this will result in labor & material shortages that will drive salaries, hourly wage rates & material costs higher. We are starting to see US Engineering & Construction Management firms raising their billing rates & 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 & 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.
The population of Canada is growing; this growth will have a positive impact on new & existing homes / apartments, health care facilities, hotels, retail & office construction. Overall, Canadian construction with the exception of Oil / Gas construction is primed to have a decent 2nd half in 2019.
The latest Canadian 2019 GDP growth forecast is 1.3% – 1.5%, similar to a year ago, inflation is forecast to be in the 1.9% to 2.2% & unemployment is slowly increasing & set to finish 2019 out in the 5.6% 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% & 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 & 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 & bridges & 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.
Infrastructure (highways) & commercial construction have experienced reasonable growth in the last 5 years. The skylines of Vancouver, Edmonton, Calgary & Toronto have seen a fair number of high rise offices, hotels & the like constructed in this period.
The Canadian Dollar has continued to weaken against the US dollar, (1.34 to the US Dollar at the end of 6/20/2019). Canadian construction costs (labor & materials) are forecast to stay relatively flat rising no more than 2.4% to 2.7%.in the 2nd half of 2019.
Canada’s growing population, its flourishing housing market & 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, & Canada endorsed a new trade accord, titled the US-Mexico-Canada Agreement (USMCA), this new trade arrangement will transfer some automobile vehicles & components produced in Mexico to the US & open up dairy products from the US into Canada.
Mexico has a new President Mr. Manuel López Obrador & 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 & 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 & the US agreement could be a big boost to the Mexican economy & the construction sector.
The Mexican Peso is currently trading at 19.25 Pesos to the US Dollar (6/21/2019), a drop of more than 10% since the 2016 US election. While a cheaper Mexican Peso may seem to boost exports to other countries & tourism from the US, it would make imports into Mexico more expensive & it could possibly increase the current inflation rate to over 4 % in 2019. Mexico‘s GDP 2019 forecast is 1.2%, – 1.5%, unemployment is projected to be 3.4% to 3.7% in 2019. The US reached an agreement with Mexico to avoid US economically damaging 5% tariffs on imported Mexican goods. Mexico has agreed to send 6,000 troops to its southern border to prevent illegal immigrants entering Mexico.