What’s Happening in Construction: November Edition

Industry Insights Comments

US construction spending for the past 12-months hit $852 billion in September

US construction spending at 3-year high

US construction spending for the past 12-months hit $852 billion in September, marking the highest the rolling 12-month construction spending measure has been since October 2009.

Year over year, construction spending was up 7.8% in September as privately funded construction including the residential, office, and educational sectors performed particularly well. Public construction lagged however, down -4.2% year-on-year with public residential construction marking the biggest loss, dropping -26.1% over the same month last year.

AGC Chief Economist Ken Simonson said “It is heartening to see the growth in total spending, but the progress remains fragile and fragmentary. 1

In a Merrill Lynch survey of 109 North American agriculture equipment dealers, the general outlook remained positive despite the US drought.

Agriculture equipment dealers positive despite drought

In a Merrill Lynch survey of 109 North American agriculture equipment dealers, the general outlook remained positive despite the US drought.

The 6-12 month outlook is described as “constructive” with the biggest risks seen as the:

The US drought was not seen as a key risk although concern remains that this year’s drought may only be the first of a multi-year drought scenario.

Despite these concerns, over 80% of dealers expect the fall selling season to be flat or up with the majority of respondents expecting that prices for new tractors and combines will move higher over the next six months. The outlook for used equipment pricing is somewhat softer but only 6% expect prices will move lower. 2

Major infrastructure projects planned in South Africa and India

New strategic projects valued at US$465 billion over the next 15 years have been proposed by South African President Jacob Zuma.

South Africa will invest $98 billion in the next 3 years alone towards the projects that will support the country’s road, rail, port, energy, and communication infrastructure. 3

Similar projects are planned in India where the country plans to invest $1 trillion in new infrastructure by 2017, particularly in health care and transportation. 4

 Sales of new excavators for 2013 are expected to be down another 10-15%

Hard landing for the Chinese heavy earthmoving equipment

The Chinese heavy earthmoving equipment market has experienced a 40-50% decline since mid-2011.

It is believed that the excavator market is in need of consolidation as an estimated 8-9 months of excavators are currently in inventory. Sales of new excavators for 2013 are expected to be down another 10-15% with dealers not seeing a significant pick up from new infrastructure projects in China5.

Other Construction News Making Headlines

  1. World's largest steelmaker reports third-quarter loss on weak Chinese demand6
  2. 5 of the 10 world's biggest construction firms are now Chinese
  3. McGraw-Hill forecasts a 6% construction increase in 20138
  4. Construction starts expected to rise to $483.7 billion in 20139
  5. As of September construction firms employ 5.523 million people in the US10
  6. Home building surges to 4-year high11
  7. 40% of skyscrapers under construction worldwide are in China12
  8. Construction material costs jump for second month in a row in September13

Sources:

  1. US Construction climbs again in September
  2. BofA Merrill Lynch Global Research, October 24, 2012
  3. US $465 billion South Africa infrastructure plan outlined
  4. AIA Trade mission to India
  5. BofA Merrill Lynch Global Research, November 6, 2012
  6. Weak Chinese demand for steed pushed Arcelormittal red
  7. Chinese firms are new challengers in the global construction business
  8. ENR Constrution
  9. ENR Construction
  10. Construction sector adds jobs in August and September
  11. China hitting new heights
  12. Construction material costs jump for second month in a row
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