Construction: Global Sector Report 2017

2/9/2017 - Report
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Construction

  • Long-term stabilization of production in the  construction sector worldwide with a slow recovery in advanced markets
  • Increasing interest rates and prices risk weighing on household purchasing decisions and firms’ capacity to invest 
  • Rebound in the residential market in advanced countries while the construction sector is on a  downturn in emerging countries


The return to structural growth could be shaped by increasing interest rates


Growth in the construction sector is set to remain slow with a +3.5% increase this year after +3.4% in 2016. Moreover, it currently faces a major shift: production in emerging markets will grow in 2017 by only +4.2% vs. +8.8% over the last 10 years. Conversely, it will rebound in advanced economies with +2.5% vs. -0.9%.  


Despite structural weaknesses and price pressures, the sector has become slightly less risky. Yet, outside of this current positive global trend, the sector is still one of the riskiest with several countries facing a negative outlook. 


The sector remains mainly composed of small firms with very high leverage ratios, a weakness highlighted by longer payment terms compared to other sectors. 


Strong cyclicality and cross-country differences make for an even more complex picture. Recovery in the UK has been interrupted early last year. The sector also faces headwinds in oil exporting countries as oil prices are decisive for infrastructure investments. In the United States, the sector could be reinforced by the decisions of the new government. Some countries continue to face difficulties on inflation (China) while others have weathered the storm (France, Spain). 


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