Recent years have seen the emergence of a new normal economy as steady growth continues. While political uncertainty persists, the pace of global growth is building momentum but is unlikely to reach the booming rates seen before the financial crisis without improving productivity.
This year we’ve gathered construction cost data from 43 markets across the world, drawing on information from local experts who are experiencing first-hand the opportunities and challenges in their regions.
Our team of economists worked closely with our local experts to analyse an expansive cost dataset to provide real insight into how the construction industry is performing. This reveals key global trends as well as more detailed local market dynamics.
The start of 2016 was a concerning one for the global construction industry; the commodities market was faltering and commodity reliant economies across the globe were struggling to adjust. Fast forward to the second half of the year and the picture looked more stable.
The commodities market bottomed out and price increases returned, giving renewed confidence to many regions of the world. Major economies such as Brazil, Russia, Europe, the USA and China delivered a higher GDP than many predicted.
This improved growth is a welcome and positive sign, but increases in GDP remain below the global annual growth rates seen prior to the financial crisis in 2009 when global economic growth peaked at 4.3 percent, compared to 3.1 percent in 2016.
This has given to what many refer to as a new normal for the global economy – slow and steady growth. However recent forecasts suggest that growth is gaining momentum, with the IMF forecasting 3.5 percent global growth in 2017.
This year’s international construction market survey reflects this position with construction markets heating up as global conditions improve. Global construction cost inflation for 2016 was recorded at 3.7 percent, compared to 2.9 percent in 2015. The growing skills shortage is a significant driver and is becoming a more acute global problem for the industry.
“The growing skills shortage is becoming a more acute global problem for the industry.”Steve McGuckin
Economists are calling for a significant improvement in productivity to build momentum in global economic growth, but productivity is a persistent issue for the worlds’ economies and the construction industry in particular which represents 6 percent of global GDP.
Globally, the construction sector’s annual productivity improvements averaged 1.0 percent over the past two decades, compared with 2.8 percent for the total world economy and 3.6 percent for the manufacturing sector3. Compounded over 20 years, this difference in productivity improvement is a significant delta.
The construction industry’s productivity is in a persistent deadlock from intrinsic barriers, including a lack of continuity of projects and workload, the highly cyclical nature of the industry and the need for capital investment to support innovation.
There are opportunities to be taken. Steady global economic growth, increasing demand for construction and a shortage of skills and labour, combine to provide governments, clients and the industry compelling drivers to grasp the moment and commit to investing in productivity improvement for longer term gains.
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