Global Construction Outlook: Short-term term Pain, Long-term Gain Laura Hanlon Product Manager, Global Construction Outlook May 21, 2009
What This Means for You The world is set to be hit this year with the steepest decline in global construction spending in at least 20 years The bright spot in the outlook comes from numerous fiscal stimulus packages with infrastructure spending at their core Modest recovery in 2010 will be followed by a stronger rebound in 2011
Global Construction Outlook: Total Construction Billions of 2005 $US, Left-axis 9000 8000 7000 6000 5000 4000 3000 2000 1000 Percent change, Right-axis 8% 6% 4% 2% 0% -2% -4% 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018-6%
Total Construction Regional Review Non-Japan Asia dominates the construction outlook North America worst hit in 2009 Western Europe lags in recovery 190 170 (Index, 2008=100) 150 130 110 90 70 50 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Asia MidEast and Africa South America Non-Japan Asia Eastern Europe North Am erica Western Europe
Regional Focus: North America North America experiences the largest decline of all regions in 2009, contracting by 11.4%, mostly a result of the decline in the U.S. residential construction market Billions of 2005 $US, Left-axis 1,600 Percent change, Right-axis 15% 1,400 10% 1,200 1,000 5% Mexico 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0% -5% -10% -15% Canada United States North America (right-axis)
Regional Focus: Western Europe The Western European construction market is mostly comprised of five major economies Western European Construction Spend, 2008 (Percent) 23 15 5 16 13 13 16 France United Kingdom Germany Spain Italy Netherlands Rest of Region* *Rest of Region includes Austria, Belgium, Denmark, Finland, Greece, Ireland, Norway, Portugal, Sweden, Switzerland, and Turkey -- each which make up 2-3% of Western European total construction
Regional Focus: Western Europe Western Europe will endure the second-worst market conditions this year and is expected to experience the worst recovery going forward (Percent) 5 3 0-3 -5-8 -10-13 -15 United Kingdom Construction Growth by Country Spain France Netherlands Italy Germany 2009 2010 2011 2012
Regional Focus: Eastern Europe Eastern European construction markets will be hit in the near-term because of their economic dependence on Western Europe (Percent) 15 10 5 0-5 Construction Growth By Country -10 Ukraine Russia Hungary Romania Czech Republic Slovakia Bulgaria Poland 2008 2009 2010 2011
Regional Focus: Middle East Middle East economies have been hurt by the bust in oil prices; the nonresidential construction sector will be most affected (Percent) 15 Construction Growth By Country 10 5 0 ` -5-10 Iran Bahrain United Arab Emirates Saudi Arabia Qatar Kuwait 2008 2009 2010 2011
Regional Focus: Asia Asia, lead by China and India, is the only region that will not see declines in total construction spending in 2009 (Billions of 2005 $US) 3000 2500 2000 1500 1000 Indonesia Australia Korea India Japan China 500 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Asia Is Gaining Share from Developed Countries 2008 2018 Western Europe 34% Eastern Europe 5% Asia 34% Middle East & Africa 4% North America 19% South America 4% Western Europe 27% South America North 3% America 20% Middle East & Africa 4% Asia 41% Eastern Europe 5%
China to Lead World in Construction Spend by 2016 Total Construction Spending (Billions of 2005 $US) 1,600 1,400 1,200 1,000 800 600 400 200 United States China Japan Spain United Kingdom Germany India 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Total Construction Outlook Regional Comparison World 2.3% Non-Japan Asia 7.1% Asia 4.9% Middle East & Africa South America 3.5% 3.2% Eastern Europe North America 2.0% 2.5% Western Europe -0.5% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Compound Annual Growth 2008 13 (Percent)
Residential Construction Outlook Regional Comparison World North America Non-Japan Asia Asia Middle East & Africa South America Eastern Europe -0.5% 1.1% 2.6% 2.2% 1.9% 5.1% 6.9% Western Europe-3.3% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Compound Annual Growth 2008 13 (Percent)
Structures Construction Outlook Regional Comparison World 1.1% Non-Japan Asia Asia South America 3.0% Middle East & Africa 2.3% Eastern Europe 1.3% 5.0% 6.6% Western Europe North America -2.7% -1.3% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Compound Annual Growth 2008 13 (Percent)
Infrastructure Construction Outlook Regional Comparison World 5.2% Non-Japan Asia 8.9% Asia Eastern Europe Middle East & Africa Western Europe 6.4% 6.1% 5.4% 5.3% South America 4.2% North America 1.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Compound Annual Growth 2008 13 (Percent)
Infrastructure Leads Growth Across All Regions in 2009 10.0% Percent Change Year Ago (%) 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% World North Latin Western Eastern Asia Middle East America Total Residential America Nonresidential Europe Europe Structures Infrastructure
Infrastructure to Lead Global Construction Compound Annual Growth (Percent) 8% 7% 6% 5% 4% 3% 2% 1% 2003-08 2008-13 2013-18 0% Total Nonresidential Structures Infrastructure Residential
Infrastructure Gains Share of World Construction 2008 2011 Infrastructure 29% Residential 35% Structures 33% Infrastructure 33% 36% Structures 34% Residential
Stimulus Packages Around the World *All currency in US$ Total Stimulus Australia $26.5 billion $14 billion Stimulus for Construction Canada $33 billion $16.5 billion China $585 billion $350 billion France $34.5 billion $20 billion Germany $65 billion $30 billion India $4 billion $4 billion Italy $114 billion $6.5 billion Malaysia $16.3 billion $6 billion South Korea $11 billion $10 billion Spain $14.5 billion $10.5 billion United Kingdom $31 billion $4.6 billion United States $787 billion $134.8 billion
Leading Countries for Infrastructure Investment China Panama Singapore United Kingdom South Africa Malaysia India Australia Russia 9.5% 9.0% 8.8% 8.8% 8.5% 8.0% 7.7% 10.9% 12.0% 0% 2% 4% 6% 8% 10% 12% 14% CAGR 2008-13
Balancing Opportunity with Risk Total Construction Spending Growth, Real 2000 US Dollars (CAGR %, 2008-2013) 10% 8% 6% 4% 2% 0% -2% United States Japan Australia Median Construction Risk South Korea Canada Germany Italy Netherlands France China India Brazil Average Global Construction G th Russia Mexico -4% United Kingdom Spain 0 10 20 30 40 50 Construction Risk Score - 5 Year Circle Size = Total Nominal Construction Spending in 2008
BRIC Outlook China and India continue to lead construction growth in the outlook Russia makes up for 2008 13 slowdown in the second-half of forecast Compound Annual Growth 16% 14% 12% 10% 8% 6% 4% 2% 0% 2003-08 2008-13 2013-08 China India Russia Brazil
BRIC Construction Shares China Infrastructure 27% Residential 21% India Infrastructure 32% Residential 19% Russia Structures 52% Brazil Structures 49% Infrastructure 26% Residential 22% Residential 27% Infrastructure 52% Structures 52% Structures 21%
BRIC Country Nonresidential Structures Construction Shares China Office, 8% Commercial, 7% India Office, 11% Institutional, 6% Industrial, 49% Commercial, 25% Industrial, 79% Institutional, 15% Russia Office, 10% Brazil Office, 17% Industrial, 48% Commercial, 29% Industrial, 44% Commercial, 13% Institutional, 13% Institutional, 25%
Top 15 Countries by Construction Spend Total Construction Spending 2005 US$ Billions 2009 Total Real Construction Spending Growth 2005 US$ Growth % 2008 09 Growth % 2009 10 Growth, CAGR % 2008 13 United States 845.9 (-13.0%) (-2.3%) +2.2% China 701.6 +9.9% +9.8% +9.5% Japan 571.2 (-5.4%) (-3.3%) (-0.8%) Spain 283.1 (-10.6%) (-3.3%) (-2.1%) France 272.6 (-4.8%) (-1.5%) (-0.3%) Great Britain 270.8 (-12.3%) (-8.0%) (-2.8%) Germany 243.5 (-2.5%) (-1.7%) (-0.1%) Italy 237.8 (-3.3%) (-0.8%) +0.2% India 214.8 +4.4% +7.0% +7.2% South Korea 157.4 +1.4% +4.3% +2.3% Australia 135.6 +4.8% +4.9% +5.1% Russia 107.2 (-6.8%) (-0.1%) +1.8% Canada 104.4 (-3.3%) (-1.8%) +1.0% Brazil 92.0 (-0.2%) +3.2% +3.7% Netherlands 90.4 (-3.6%) (-1.3%) (-0.3%) Mexico 89.1 (-3.8%) +1.6% +1.0% 69 Country Total 5,565.0 (-3.7%) +0.7% +2.3%
Top 15 Countries by Construction Growth Total Construction Spending 2005 US$ Billions Total Real Construction Spending Growth 2005 US$ 2009 Growth % 2008 09 Growth % 2009 10 Growth, CAGR % 2008 13 China 701.6 +9.9% +9.8% +9.5% Australia 135.6 +4.8% +4.9% +5.1% Indonesia 82.0 +4.7% +6.7% +5.5% India 214.8 +4.4% +7.0% +7.2% Bangladesh 14.9 +4.0% +5.3% +5.8% Qatar 5.5 +3.8% +0.2% +3.4% South Africa 32.1 +3.4% +5.9% +5.6% Panama 2.9 +3.0% +6.6% +7.1% Vietnam 7.6 +3.0% +3.6% +4.5% Thailand 21.8 +2.6% +4.4% +4.5% Saudi Arabia 58.6 +2.4% +5.2% +5.3% Kenya 2.4 +1.7% +4.7% +5.2% South Korea 157.4 +1.4% +4.3% +2.3% Poland 66.8 +1.3% +2.2% +3.4% Sweden 37.5 +1.0% +2.4% +3.4% 69 Country Total 5,565.0 (-3.7%) +0.7% +2.3%
Top 15 Riskiest Countries Total Construction Spending Total Real Construction Spending Growth 2005 US$ Construction Risk 2005 US$ Billions 2009 2009 Growth % 2008 09 Growth % 2009 10 Growth, CAGR % 2008 13 Venezuela 38.33 17.0 +0.5% +2.9% +4.6% Ecuador 34.54 0.5 (-1.9%) +1.9% +1.8% Iran 26.56 30.3 (-5.2%) +0.7% +1.1% Bolivia 26.11 0.8 (-0.1%) +2.1% +2.2% Argentina 22.06 25.4 (-2.4%) +2.8% +2.3% Russia 16.50 107.2 (-6.8%) (-0.1%) +1.8% China 15.34 701.6 +9.9% +9.8% +9.5% Pakistan 15.00 6.3 (-0.4%) +1.7% +2.8% Kenya 14.02 2.4 +1.7% +4.7% +5.2% Ukraine 13.92 10.5 (-9.6%) (-5.3%) (-0.6%) Turkey 13.42 49.0 (-0.6%) +2.2% +4.0% Bangladesh 13.17 14.9 +4.0% +5.3% +5.8% South Africa 10.62 32.1 +3.4% +5.9% +5.6% Indonesia 10.45 82.0 +4.7% +6.7% +5.5% Colombia 10.13 23.0 (-1.3%) +3.3% +2.3% 69 Country Total 8.34 5,565.0 (-3.7%) +0.7% +2.3%
Implications for Your Business While this is the worst year for the world construction market in two decades, there are still industries and regions where we can find potential The infrastructure construction industry remains strong this year and in the outlook, in part due to strong and supportive country-specific stimulus packages Non-Japan Asia, lead by China and India, is the only region with a growing construction market this year and is expected to expand exponentially in the outlook A modest recovery expected in 2010, but strong pick-up in the global construction market in 2011 be ready for the rush!
Thank you Laura Hanlon Product Manager, Global Construction Outlook laura.hanlon@ihsglobalinsight.com