China will be the world’s biggest construction market by 2010, while the USA’s rate of construction growth will fall.
That is according to a 10 year forecast of 50 international construction markets by economic research company Standard & Poor’s and construction information agency FW Dodge. The report says the global construction industry, worth $3.6 trillion ($3,600bn) last year, will grow by around 5% a year until 2003. Civil engineering will lead the way, growing at 6.1%.
China’s building activity will increase by 10% a year, the report predicts, in response to strong population and industrial production growth, real rising incomes and a rapid rate of urbanisation.
In the decade ahead new market opportunities will be harder to find in North America and easier in the rest of the world. North America and the UK are mature markets that will have lower growth. They are at, or close to, their peak in the current construction cycle.
The report says that the US economy is expected to slow down this year. However, were it to keep growing, the eventual impact on global trade and financial imbalances would be severe. The bubbles in the US economy (stock market, low saving rates and current account deficit) would worsen and when they finally burst the downturn would be more painful.
Many of the markets identified as the fastest growing have the greatest risk factors. Iran tops the table of growth markets. It has a predicted growth rate of 23% a year in construction investment until 2003. However, it is also number 10 on the table of the 20 highest risk markets. Other high growth, high risk markets include India, Thailand and Indonesia.
In line with the S&P forecast are figures from the Construction Industry Manufacturers Association (CIMA), which predicts US construction to grow by about 2% in the next few years and Asia to grow by more than 6%.
According to CIMA, shipments of construction equipment from US manufacturers have slowed but are running ahead of last year. “However, we need to remember that our industry has enjoyed record growth in the past several years,” said CIMA president, Dennis Slater.
Freedonia, a US market research group, said the world demand for heavy construction equipment will increase by 6% per year to 2003 to $93.5 billion (up from $70 billion in 1998). Fuelling growth will be demand for new equipment in Asia, as countries hit by the financial crisis in 1997 begin to recover.
Recovery is also expected in Brazil and other Latin American countries which have liberalised their economies, according to Freedonia. Demand in North America, Western Europe and the advanced countries of Asia Pacific will largely be associated with the maintenance and upgrading of existing infrastructure and building stock.