Around the globe
General economic overview
In 2021, each of the North American economies – the USA, Canada and Mexico – grew strongly following the dramatic slowdown of 2020. Of the three, the USA is showing the strongest performance with annual GDP in 2022 set to exceed US$22tn – well above pre-pandemic levels.
Canada saw annual growth of 6.7 percent in Q4 2021. Renewed consumer spending should continue to drive growth during 2022. Mexico also saw a resurgence of growth in 2021 which is set to continue in 2022. However, the headwinds of inflation, higher energy prices and supply bottlenecks are starting to impact consumer sentiment and business confidence in all three nations.
Inflation is becoming an increasing problem across the region, reaching 8.3 percent in the USA, 6.8 percent in Canada and 7.7 percent in Mexico, with supply chain disruption, labour shortages, and higher energy prices all pushing up costs. House prices are also still rising. The Case Shiller 20 city index, which shows house price movements, indicated 21.2 percent growth for the year to March 2022 for US housing. Canadian house prices are also up 9.4 percent over the same period.
In the USA, there were about 11.9 million job vacancies in April 2022, about 6 million more than the amount of unemployed workers (Job Openings and Labor Turnover Survey). Near full employment means wage increases are more common, as employers must pay more to encourage workers to move jobs. This is already impacting construction, transportation and warehousing with wages increasing at double-digit levels. A more widespread upwards wage spiral is a real possibility, and the Federal Reserve has indicted there are likely to be more interest rate hikes to dampen demand and help curb inflation over the course of 2022.
Construction sector performance
The construction sector is strong across the USA. This trend is not just confined to the major cities, with secondary cities and regional areas also performing well. Total construction in the US increased 11.2 percent to US$1.7tn in the year to February 2022 (US Census Bureau) with residential contributing around half of the total. Whilst residential grew by 16.5 percent year-on-year, commercial construction saw growth of 18 percent, recovering from a low base during 2020.
Construction has also recovered strongly in Canada, increasing by 4.6 percent in January 2022, compared with a year earlier. Residential construction is growing fastest. Condominiums and apartments are up 13 percent year-on-year and new houses are up 18 percent. Commercial construction grew by 9.4 percent year-on-year. In Mexico, overall construction levels are down from 2020 levels but expected to gradually increase over the next two years.
Labour shortages remain a problem with most contractors having difficulties sourcing skilled workers. Although there are now more workers in construction than before the pandemic, greater numbers are still needed. Strikes for higher pay are becoming more common. The labour mismatch and continued supply bottlenecks for building materials is adding to costs and extending schedules.
In the industrial and commercial space, science and technology growth is driving construction. Semi-conductor manufacturing, electric vehicles and battery manufacturing facilities are some of the fastest growing sectors, with major projects kicking off including Ford’s $11.4bn investment in two EV battery gigafactories in Tennessee and Kentucky. Life sciences, healthcare facilities and data centres are also at the forefront of construction.
Progress of the environmental agenda
The US Infrastructure Investment and Jobs Act (IIJA) was passed into law in November 2021 and is a major outlay costing an estimated US$1.2tn, with projects designed to modernise infrastructure and boost sustainability.
The IIJA includes a national US$4.5bn programme of electric vehicle charging stations to help fund 500,000 locations by 2030. US$20bn is allocated to clean-energy projects such as hydrogen, carbon capture, advanced nuclear and energy storage. The electricity grid will be upgraded and redesigned to deliver clean energy, where it is needed. Public transport is also being boosted, including the Northeast Rail Corridor, and there are upgrades to aviation and ports facilities, helping prevent future supply chain bottlenecks.
There are also programmes to help prevent the worst aspects of floods, fires and droughts caused by climate change. US$21bn is allocated for the clean-up of brownfield sites to eliminate further environmental damage. Encouragingly, the US has rejoined the Paris climate agreement and has also set a plan to halve greenhouse gas emissions in the next decade.
Overall, the prospects for North America look positive throughout 2022 and beyond, despite emerging fears of a recession towards the end of this year or early in 2023, caused by increases in interest rates to control inflation.
This comes at a time when construction is strong and business profits are driving additional investment. The high levels of capital being pumped into the IIJA will ensure that work volumes continue to grow in the construction sector, potentially adding millions of construction jobs.
Inflation and skills shortages are the main challenges. The “great resignation”, predicted during the pandemic, saw the labour pool shrink, and in the absence of migration, population growth has slowed to a crawl. This is likely to be temporary, especially as higher wages and the easing of travel restrictions prompt more workers to join the US workforce.
Later in the year, some of the drivers of inflation, such as supply chain bottlenecks, and higher energy and materials prices, should ease. However, the war in Ukraine is a further setback which is still playing out.
Current tendering condition
Future market outlook
“The construction sector is strong across the USA. This trend is not just confined to the major cities, with secondary cities and regional areas also performing well.”
John Robbins, Managing Director
Top three regional
of respondents said that excessive lead times had a significant or high impact on the delivery of construction projects
of respondents said skilled labour shortages had a significant or high impact on the delivery of construction projects
of respondents said that rising costs of construction had a significant or high impact on the delivery of construction projects
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