Construction Industry To Experience Slow Growth In 2023

International construction sector’s progress is predicted to remain sluggish this year, expanding just by 0.8%. Excluding China, the sector is predicted to contract by 0.1% because of the weak economic backdrop as well as additional issues that are specific to the global construction segment, like the high construction material costs and the shortage of labour, says GlobalData, one of the leading analytics and data firms.

As per GlobalData’s latest report, Construction Market Size, Trends, and Growth Forecasts by Key Regions and Countries, 2023–2027, the worldwide construction industry widened by 2.1% in real terms last year, with the speed slowing from the 3.8% growth that was recorded a year before that.

This deceleration goes on to reflect the challenging landscape in most of the markets across the world in the form of tightening monetary policies that go on to dampen investment and high inflation. Apart from China, which went on to post a 5.5% expansion in 2022, the international construction sector edged up just 0.6%. A steep decline in US construction activity in real terms happened to be a key factor in the weak global outturn of 2022, teamed with a slowdown across Europe, where major markets have been fighting really hard due to the energy crisis.

According to the construction analyst at GlobalData, Danny Richards, the expected poor performance this year goes on to show the downturns taking place across the advanced nations, with the entire Europe expected to shrink by 2.8%. Besides this, the North American market is expected to fall by 0.9%. Australasia is not going to be any different, as it will witness a contraction of 1.5%. Growth in the emerging markets is going to be positive; however, the growth pace will slow to 2.4% from what it was in 2022, i.e., 4.6%. GlobalData forecasts that the worldwide construction sector is anticipated to regain some momentum when it comes to growth in 2024, assuming that there will be an improvement in global economic stability wherein the output will expand by 3% and there will be an annual average of 4.2% across 2025–2027.

The western European construction outlook seems gloomy as activity has hit due to a decline in investor confidence in the scenario of a looming economic recession as well as high inflation. Some markets did outperform in the last year, with Italy and Greece recording high growth rates because of the activity that has been bolstered due to funding by the EU. That said, other regions were significantly weaker, like Germany, which went on to record a contraction of 2.2%. It is well to be noted that most of the markets will suffer a significant downturn this year because of weak investment growth as well as high prices when it comes to key construction materials as well as energy costs, which is a trend that has seen an elevation due to the ongoing Ukraine war.

As per Richards, the underlying instability related to macroeconomic aspects has pushed down growth in North America, especially in the residential sector, which has suffered the most as a result. The inflationary pressure is starting to subside, and the Federal Reserve is starting to bring down rate hikes, all of which have led to a better recovery in growth. The prediction when it comes to the latter half of the forecast period has been pushed hard by a robust outlook when it comes to infrastructure construction in the US.

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