The global construction market expanded by 2.1% in 2011 and should grow by 3.0% in 2012, reaching an annual total of $6.0 trillion, according to an analysis by IHS Global Insight, an Englewood, Colo.-based economic consulting and forecasting group. IHS believes the global market still faces uncertainties, but there are signs that worldwide construction is beginning to recover after a few tumultuous years.
Overall, IHS says construction in the developed world will continue to lag the rate of growth in emerging countries. The Asian-Pacific region is projected to have the fastest-growing construction market in 2012 at 7.3%, followed by Latin America at 5.9% and the Middle East and Africa at 5.3%, according to IHS. Eastern Europe's construction market is expected to grow at a 3.9% pace.
On the other hand, western Europe's fiscal problems will result in a 1.2% drop in that region's construction market, while the sluggish U.S. construction market is expected to cause the North American market to decline by 0.9% in 2012, according to the IHS study.
The fiscal problems in western Europe and the political uncertainties and slow economic recovery in the U.S. will act as a drag on the economies of emerging countries, says Scott Hazelton, IHS director of construction and industrial consulting. He notes that these economic problems will result in lower demand for products and fewer investments by the West in emerging nations.
Asian-Pacific Region Leads Growth
Led by China and India, the Asian-Pacific region continues to post the highest growth rate. However, there is some concern China's real estate market has become overvalued. Further, the nation's high-speed-rail program was put on hold last year after a major accident, notes Karen Blanford, IHS's construction-industry research director.
However, Blanford notes that China continues to plan for rail expansion. Also, as more of its citizens move to urban areas, the country is now focusing on a major housing program. Further, China's twelfth five-year plan includes an initiative to expand its steel production, particularly in the southeast and near China's western border, Blanford adds.
India's construction market continues to grow, but its growth has moderated in the face of declining demand from Europe and the U.S. Blanford notes that investors in India now are targeting infrastructure, particularly roadbuilding and oil pipelines.
Brazil Dominates Latin America
Except for Asia, Latin America is the strongest growth market for construction. In fact, the construction market throughout Latin America, except in Venezuela and Colombia, is growing at a higher rate than the global average, Hazelton notes. But the big story continues to be Brazil, which constitutes 44% of the region's gross domestic product. Its construction market is expected to grow by 8.5% in 2012, according to IHS.