Growth in global construction industry gaining momentum in 2016
The pace of growth in the global construction industry stabilized in 2015, standing at 2.7 per cent in real terms, unchanged from that recorded in 2014. There will be a slight acceleration in output growth in 2016, with the pace of increase edging up to 2.8 per cent, supported in part by an improvement in global economic growth. These are the findings in the latest market analysis from Timetric’s Construction Intelligence Center (CIC).
The Middle East and Africa (MEA) region will post the fastest growth in 2016, at 5.9 per cent. However, this is a slight deceleration compared with the rapid growth of 6 per cent and above in recent years. Moreover, it reflects the impact of the decline in global oil prices, which has a negative effect on public investment plans and also spending on construction projects in the region’s energy sector.
Having suffered three consecutive years of slowing growth, the Asia-Pacific region, which accounts for around 45 per cent of the global construction industry, will expand by 4 per cent in 2016. The slowdown in the region’s growth in the past few years has been driven primarily by the weakness in China whose construction industry is estimated to have dropped to 5.2 per cent in 2015, down from 6.8 per cent in 2014 and 9.5 per cent in 2013.
According to Timetric, the industry in Asia-Pacific is not expected to continue to decelerate, in part because in China the authorities will attempt to support the economy with public investment and infrastructure programmes. Construction output in Australia will pick up again in 2016, having suffered a sharp decline in recent years in the face of difficulties in the energy and mining sectors.
Construction in the U.S. soared to an estimated 6.4 per cent in 2015, bolstered by the rapid expansion in the residential market as well as spending on new projects in energy and power. Although still expanding, there will be a slowdown in growth in 2016 to more sustainable rates, but data on new construction starts will remain impressive, supported by the stronger state of the U.S. economy.
The size of the construction industry in Western Europe is still some 14 per cent smaller than it was before the financial crisis, but it is recovering and will post growth of 2 per cent in 2016. Construction works in the U.K. will expand by around three per cent, with government support for infrastructure and housing projects continuing. Having suffered contractions in output in 2015, the construction industries in France and Germany will return to positive growth in 2016, while in Spain there will be a continued recovery.
Eastern Europe suffered two consecutive years of decline in 2014 and 2015, with Russia’s demise having an impact on other markets in the region. The construction industry in Russia will contract further in 2016 in real terms, with the weak economy and low oil prices continuing to curtail investment growth. Nevertheless, other major markets, such as Poland and Czech Republic, will expand, contributing to growth of 1.6 per cent for the region as a whole in 2016.
Latin America will remain the laggard in 2016, with its construction industry expanding by just 0.8 per cent. Construction output in the region fell by 2.5 per cent in 2015, with Brazil’s construction industry estimated to have shrunk by 8.5 per cent. Although works related to the 2016 Olympic Games in Rio de Janeiro will provide support, investment plans in general continue to be undermined by the fall-out from the Petrobras scandal.
Global construction equipment market to improve in 2016
Global sales of construction equipment are forecast to grow 3.9 per cent in unit terms in 2016, to 760,508 machines, according to U.K.-based specialist economic forecasting and market research consultant, Off-Highway Research.
The expected improvement follows a weak performance in 2015, when global unit sales fell more than 10 per cent from the total of nearly 818,000 machines sold in 2014. In 2016, growth is expected in the European, North American and Indian equipment markets. Off-Highway Research also forecasts stabilization in China, where sales of construction equipment have fallen from a peak of 435,070 units in 2011 to a projected 131,345 machines in 2015 – a decline of 70 per cent in the space of four years.
“There can be no doubt that 2015 was a tough year for the global equipment industry, due to slowing world economic growth and weak commodity prices,” said Off-Highway Research managing director David Phillips. “Unit sales fell to their lowest since the crisis years and the drop in the Chinese market was particularly brutal. However, there were improvements in several developed countries which helped offset some of these losses.”
The gradual improvement in Europe which began in 2014 is expected to continue this year, with unit sales rising from a provisional 125,705 units in 2015 to 130,503 machines. Similarly, the buoyant North American market should rise a further four per cent to 186,025 machines. Continued steady improvements are expected in the Indian construction equipment market, with unit sales expected to rise to 46,414 machines, compared to 38,554 in 2015. Meanwhile in China, the market is expected to show an uptick of around four per cent, with sales stabilising at 137,820 units.
In Japan, construction equipment sales are expected to fall from 79,998 units in 2015 to 73,825 machines in 2016. The key drivers of this are a tailing-off of reconstruction work following the 2011 earthquake and tsunami and the winding down of the government’s economic stimulus programmes.
“Off-Highway Research’s forecast is for the start of a gradual return to health in the global construction equipment market in 2016. However, as has been the case since the crisis years of 2008 and 2009, business confidence remains fragile, and the uncertain geopolitical outlook around the world could have a negative impact on the sector,” said Phillip.