VIDEO: Global construction outlook

By Chris Sleight05 August 2011

International Construction editor Chris Sleight.

International Construction editor Chris Sleight.

Global economic growth this year looks reasonable, with the International Monetary Fund (IMF) putting world growth GDP growth at +4.5%. However, performance will be sharply divided between the booming developing markets and the much more sluggish developed markets such as Europe and the US. GDP is expected to fall in Japan this year, following the March earthquake.

Construction output forecasts from IHS Global Insight echo this. While the world construction market is expected to grow +3% this year, developing markets will race ahead, led by Asia and Latin America, while developed markets will be flat at best.

iC's own study of the world's top 200 construction companies supports the view that the global construction industry is looking up. Revenues among the world's biggest construction companies grew +2% or so in 2010, but more striking was the rebound in profitability, with the industry's operating margin recovering to 4.79%.

Global construction equipment markets are expected to continue their recovery this year, according to Off-Highway Research. Once again, the growth has come from emerging markets, particularly China.

While the outlook is improving, there are potential problems on the horizon. In developed markets, large sovereign debts will continue to hamper growth, and the lack of political leadership on this issue could exacerbate the situation. In the developing world, there is concern over inflation, and actions to counter this - raising interest rates and restricting the money supply - could hamper construction growth.

In the Middle East and North Africa, the impact of the 'Arab Spring' is yet to be fully understood. It is hoped that more efficient, transparent and investment-friendly governments will emerge, but this is not guaranteed, and there could be periods of uncertainty until the situation is resolved.

But overall, the outlook for the construction industry is positive. Next year should see growth return to all regions of the world, not just developing economies, and there could be opportunities in Japan linked to reconstruction work.

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