The world's construction market is set to be hit with the steepest decline in global construction spending in at least 20 years as activity contracts 3.7% in 2009, according to the IHS Global Insight Construction Services' Global Construction Outlook. Contractions in world construction activity are unusual, but are occurring because of the simultaneous downturn in national economies around the globe.
The projected 2009 drop follows a 1.8% decline in 2008 – the first back-to-back annual declines in global construction spending in at least the last 20 years.
The global construction market will shrink to $5.6 trillion dollars in 2009. While 2010 will see recovery, it will be weak initially, and global construction spending will not hit its 2007 peak of $5.8 trillion until 2011.
Every region except Asia will see declines in construction spending. Asian growth will be 2.6%, well below the double digit increases seen in recent years as China and India slow, while Japan and Korea contract. North America will see double digit declines and Western Europe will endure the second worst market conditions.
The bright spot in the outlook comes from the numerous fiscal stimulus packages with infrastructure spending at their core. While global residential spending will contract nearly 10% and nonresidential construction will decline nearly 5% (with institutional spending limiting a much worse outlook for commercial and industrial structures), infrastructure spending will actually grow at a better than 5% rate in 2009.
"While 2010 will be weak, Asian dynamism and North American resilience will return to lead global construction growth near or above 5% for 2011 and 2012," said Scott Hazelton, Director of Construction Services at IHS Global Insight.
The Global Construction Outlook is a quarterly publication of IHS Global Insight's Construction Service that monitors and predicts construction developments by 20 structure types in 69 countries. The outlook is linked to IHS Global Insight's unparalleled world economic and industry models.
Additional information about IHS Global Insight's Construction Services may be found at www.globalinsight.com/construction.