USA, CANADA & MEXICO are forecast to see between 1.9% & to 2.8% GDP growth in 4th Q of 2023.
Some good news, it look like that the US will not experience an economic recession as we transition into the 4th Q of 2023 and into 2024.
The USA is making significant advances over some of it economic rivals with the CHIPS / Science act passed in August 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 facilities along with computer chip facilities & call centers that have recently been announced. This surge in spending is expected to continue into the 1st half of 2024 and possibly beyond.
U.S. Construction labor challenges continue, there is a shortage of skilled construction workers such as electrician, welders, pipe-fitters and millwrights. Baby boomers (individual reaching 55 years of age) are retiring at record numbers. Recent graduates / young workers are not entering the construction industry in the numbers needed to sustain a growing construction sector. These younger workers are attracted to other industries such as IT. These, and other industry sectors look more attractive and less demanding to these individuals.
Construction sectors supporting computer chips, consumer products, healthcare, and the Pharma / medical device have bucked the trend and are seeing increased CAPEX spending as we move into 2024.
The Commercial (hotels, shopping malls & office related construction) has slowed down in the last 6 months, look for this trend to continue due to the high cost of borrowing.
Residential, infrastructure and education related construction remains stable.
In North America, construction labor costs are forecast to rise by 2% to 3% in the next 12 months. In most regions of the US, the majority of construction firms are having difficulty in hiring and retaining skilled construction workers.
Construction bulk materials (sand, stone, cement, rebar, structural steel, bricks / blocks, plywood, roofing & paint products) are trending downwards from the Pre-COVID “spikes” prices we saw a year or two ago. It is the same for piping, electric cable, light fixtures and pumps and process type equipment. Look for these construction prices to increase marginally by 1.5% to 3.5% in the next 12 months.
There are more buyers than sellers of existing single family homes in the US, this trend will remain for the next 2 to 3 years. We have seen upward trend of construction of new single family home across all regions of the US, new housing starts/ permits has increased by 9% to 11% from a year ago, look for this trend to continue for at least the next 2 to 3 years.
The Canadian infrastructure, mining and Oil & Gas construction sectors are experiencing a pick-up as we move into the 2nd half of 2023. Canada’s inflation rate is high at more than 5%, look for this rate to start to moderate in the next 6 months. A number of Electric Vehicle facilities, EV lithium battery and auto assembly facilities have recently been announced which should provide an active period for the Canadian industrial construction sector for the next eighteen months.
In Mexico, Tesla recently announced it will build a major electric vehicle factory on a 4,000 acre facility close to Monterrey. The construction cost is forecast to be in the $5 billion range. This Mexican facility is projected to produce 500,000 EV vehicles in the next 3 years, with perhaps 250,000 of these ending up in the US. . Many parts suppliers and vendors will also build facilities close to this new Tesla factory. Mexico’s inflation rate is high at more than 7.1%, look for this rate to start to moderate in the next 6 months.
Construction inflation / escalation in the USA is between 3.3% and 3.9% – average 3.7%, Canada is seeing between 5.1% and 5.5% – average 5.3% & Mexico is seeing between 5.2% and 5.8%. – Average 5.5%.
The forecast for the construction sectors for the US, Canada and Mexico is that is that market conditions are returning to a more normal period after 2 or 3 years of challenges related to COVID (high inflation, energy increases, material shortages and supply chain issues).