The study assesses each countrys spending history, current construction market, rate of economic development and business risks. It also assesses the projected growth rates of each country, as well as by regional and by broad market categorization in real dollars adjusted for inflation.
The study, released in November and last published in June 2003, also assesses the largest markets by state in the U.S. "If California was a country, it would be the ninth largest market in the world," says Chris Holling, executive managing director of Global Insight.
One of the big drivers in the world construction markets growth has been the residential market. "We project that the residential market grew 6.6% in 2004," Holling says. He says there should be a significant drop off in 2005, down to a 0.9% growth rate. "Weve seen some countries with a housing bubble. For example, the U.K. and Australia are strong, [and] beginning to slow down, but...from a very high level," Holling says.
|THE Top 15 NATIONS IN CONSTRUCTION SPENDING |
(in $ bil.)
|Source: Global Insight Inc.|
Several top executives from around the world agree that residential has reached its peak. The market in Australia is "very strong in all segments, except for residential where it is starting to drop off, though all indications are that it will be a soft landing," says Robert L. Hopton, principal for Woodhead International, a North Sydney-based engineering firm.
Rising interest rates are a major worry in the residential sector. For example, in Spain, low interest rates and immigration have been key factors in a healthy residential market, says Jose Maria Duelo, economic director of SEOPAN, a Madrid-based association of Spanish contractors. Keeping interest rates low is a major concern among members, he says. "Keeping the interest rates down" also is one of the biggest concerns of Norwegian construction firms, says Siri Legernes, managing director of RIF, Association of Consulting Engineers, Oslo.
In the U.K., the Bank of England raised interest rates 100 basis points in 2004. Some construction firms are hopeful for a reversal this year. "The housing market in the U.K. keeps the economy healthy," says Frank Jennings, managing director of Rotary Group Ltd., Antrim, N. Ireland, U.K. He says there are some signs that interest rates are moderating.
|GLOBAL CONSTRUCTION IN 1997 US $ |
(Annual percentage changes by market)
|Source: Global Insight Inc.|
Europe remains the largest regional market, according to the Global Insight study, although it shows there is a distinct difference between Eastern and Western Europe. Western Europe is projected to be the region of slowest growth, with a 1.8% annual rate, while Eastern Europe is the fastest growing, at 3.5%. Holling says that Eastern Europes industrial base is blossoming, leading to strong infrastructure demands and a need for residential development.
Some Western European markets are feeling the effects of the move east. What is especially troubling "is the delocalization of the industrial activities to Eastern Europe," as manufacturers move their capital investments there, where labor is cheaper, says Rob Lenaers, executive vice president of corporate relations for BESIX Group, Brussels.
Elections may impact some national markets. Stephen Reffitt, director of design, environment and engineering for Epsom-based Atkins, says there will be some near-term political and economic uncertainty because 2005 is an election year in the U.K. But there are markets that will continue to push forward, such as the governments new 15-year program to upgrade every secondary school, as well as a general upswing in the healthcare market and environmental work.
Similarly, election concerns may stifle Portugals sagging construction market. The government there has announced broad new capital spending plans, says...he 55 countries with the largest construction markets spent $3.9 trillion on construction in 2004, according to study by Global Insight Inc., a Waltham, Mass.-based economic consulting and research firm. It projects that the overall world market for construction will grow by 2.6% in 2005 and show an average annual growth rate of 2.6% through 2008. In nominal dollars not adjusted for inflation, the world markets annual growth rate would be 6.7%.