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Economics Global Construction Outlook: Executive …

2013 IHSC ontacts Danielle Cummings Karen Blanford 781-301-9085 781-301-9108 IHS EconomicsCOPYRIGHT NOTICE AND LEGAL DISCLAIMER 2013 IHS. Redistribution outside of the customer company or reproduction in whole or in part, in any form or medium, without express written permission by IHS is prohibited. The prices presented herein are strictly the opinion of IHS and are based on information collected within the public sector and on assessments by IHS staff. IHS makes no guarantee or warranty and assumes no liability as to their use. Global Construction outlook : Executive OutlookFourth-quarter 2013 EconomicsGlobal OutlookGlobal Construction spending increased in 2013, as it fin-ished the year up over 2012 levels. The much-antic-ipated acceleration in growth did not occur, and in fact the rate of increase slowed slightly from the in-crease the previous year.

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Transcription of Economics Global Construction Outlook: Executive …

1 2013 IHSC ontacts Danielle Cummings Karen Blanford 781-301-9085 781-301-9108 IHS EconomicsCOPYRIGHT NOTICE AND LEGAL DISCLAIMER 2013 IHS. Redistribution outside of the customer company or reproduction in whole or in part, in any form or medium, without express written permission by IHS is prohibited. The prices presented herein are strictly the opinion of IHS and are based on information collected within the public sector and on assessments by IHS staff. IHS makes no guarantee or warranty and assumes no liability as to their use. Global Construction outlook : Executive OutlookFourth-quarter 2013 EconomicsGlobal OutlookGlobal Construction spending increased in 2013, as it fin-ished the year up over 2012 levels. The much-antic-ipated acceleration in growth did not occur, and in fact the rate of increase slowed slightly from the in-crease the previous year.

2 But, all in all, it was not a bad year for Construction , particularly in light of the head-winds faced during the year. The Global economy faltered in 2013 as the political stalemate in the United States and a slowing of growth in China heightened uncertain-ty in those countries and spilled over into their trading partners. But as the year ended there were more posi-tive signs for 2014. The US Congress passed an omnibus spending bill and seems to have backed away from the game of chicken that led to the government shutdown and the recurring approaches to default. In China, the government has reinvigorated stimulus programs, par-ticularly infrastructure initiatives, and has stabilized the growth outlook . And in Europe, the northern-tier coun-tries have begun to emerge from recession with brighter prospects for growth.

3 As these major players see better days ahead in 2014, so too do their trading partners. As such, we expect a brighter year for Global Construction , with spending to increase with all regions and all sectors enjoying at least some modicum of growth. And the Construction that will be completed this year will lay a firmer foundation for even greater growth going for-ward. Cheers! Happy New Year!Total Construction Spending Growth by Country, 2012-17(Compound annual percent change, real 2010 US dollar basis)Created on 12 Dec 2014 for Susan MinioFourth-quarter 2013 2 2013 IHSIHS Economics | Global Construction outlook : Executive SummaryOver the next few years Construction spending will heat up, with most of the countries outside of the Eurozone expected to enjoy economic outlookWorld growth will accelerate gradually in 2014.

4 The world economy is likely to emerge from its extended soft patch of the last two years, thanks to the easing of the twin headwinds of private-sector deleveraging and public-sector austerity. This will be especially true for the developed economies. In many of the emerging economies, growth is also likely to be a little stronger in 2014, as they (once again) enjoy export-led growth to the United States, Europe, and China. That said, the Global growth rebound is likely to be quite modest. IHS expects 2014 growth of about , compared with in 2013. The good news is that the upside surprises about growth may more than balance out downside surprises, provided some of the more daunting risks facing the world econo-my ( , an oil shock) do not materialize. US growth will slowly speed up.

5 The US recovery lost steam in 2013 because of massive fiscal tightening. The drag from fiscal policy (estimated to have been about 1 percentage point of GDP growth) will probably be far less over the coming year especially in light of the mid-De-cember budget deal made by the US Congress. This will allow the underlying strengths of the economy to be-come more visible. These include continued strength in housing (despite the recent run-up in mortgage rates) and the ripple effects of the unconventional oil and gas boom. IHS also expects that the pace of capital spending will gather momentum, making it one of the engines of growth in 2014, although this growth will remain sub-dued relative to cyclical recoveries in the past few de-cades. Steady growth of consumer spending will also help to support the US expansion, with real GDP expect-ed to increase in the range in 2014, after a meager gain in European recovery will proceed, but at a very slug-gish pace.

6 Despite some signs of weakness, the nascent Eurozone recovery will have staying power. A multitude of factors will support growth ( in 2014), including very accommodative monetary policy, stabilizing labor markets, less emphasis on austerity by EU officials, im-proved spending power because of ultra-low inflation, better competitiveness in the peripheral countries, and more confidence in the ability of Eurozone politicians to manage the sovereign-debt crisis. Even with these posi-tive trends, some countries ( , Greece, Italy, and Spain) will struggle to achieve positive growth. On the other hand, both Germany and the United Kingdom will grow faster in 2014 than they did in s growth rate will be sustained. After hitting a low point in early 2013, China s recovery reaccelerated -2-1012345200920102011201220132014201520 162017 Real GDP(Percen t ch an g e fro m a year earlier) 036912-6-303620082010201220 142016201820202022 Residential (Left sca le, trillions of 2010 US dollars)Infrastructure (Left scale, trillions of 2010 US dollars)Structures (Left scale, trillions of 2010 US dollars)Total Construction (Right scale, percent change) Global Construction SpendingCreated on 12 Dec 2014 for Susan Minio 2013 IHS 3 Fourth-quarter 2013 IHS Economics | Global Construction outlook : Executive Summarythanks to the government s mini-stimulus.

7 IHS ex-pects the pace of Chinese growth to quicken a little from in 2013 to around in 2014. Further moderate stimulus will be applied if growth falls below Much stronger stimulus will be forthcoming if growth falls be-low The bigger growth challenge for China will be over the medium term, as the country deals with the daunting problems of an aging population and the conse-quences of rapid credit growth, including a new housing bubble and rising debt levels. Whether China can avoid the middle-income trap is one of the bigger uncertain-ties facing the Global economy in the coming emerging markets will also perform a little bet-ter. The Global environment facing emerging markets will be more growth-friendly than it has been in the last three years. US and Chinese growth will be a little stronger and the Eurozone will no longer be a drag on the world economy.

8 This means that emerging-market ex-ports will again become a source of growth. IHS expects that real GDP growth for these economies will strength-en from in 2013 to in 2014. Implicit in these forecasts is the expectation that the 2014 tapering of US monetary policy will have a relatively minor impact. Nevertheless, a return to the very rapid growth rates en-joyed in the boom years of the 2000s is unlikely, unless the governments in these countries enact more structur-al reforms that raise productivity, allocate capital more efficiently, and, thereby, boost potential rates in the developed world will re-main high. The unemployment rate in the advanced economies will only decline from in 2013 to in 2014. Technology-driven productivity improvements in both the manufacturing and services sectors will contin-ue to erode the demand for labor.

9 Firms aggressive cost-cutting efforts will continue largely unabated in 2014, heightening pressures on many governments to imple-ment corrective pro-employment policies. In the United States, the unemployment rate is expected to decline from in 2013 to in 2014 as much from weak-ness in labor-force growth as from genuine employment growth. The issue of discouraged workers could become a major political issue in the 2014 congressional elections. In the Eurozone, unemployment will remain near its re-cord highs, elevating this issue s importance relative to continued emphasis on prices will go nowhere and inflation will remain a low-level threat. During the coming year, gradually strengthening demand for most commodities will be balanced out by either higher production or am-ple inventories.

10 This means that the movement of com-modity prices in 2014 will be essentially the same as in 2013 they will go nowhere. Tame commodity markets, along with excess capacity in labor and product markets, will keep 2014 Consumer Price Index (CPI) inflation be-low 2% for the advanced economies. A growing risk is that inflation could continue to fall, as it has since 2011. Price pressures will also ease in the emerging world. IHS expects that the recent rise in emerging market infla-tion the result of the taper panic from May to August 2013, which pushed down exchange rates and pushed up imported inflation will US Federal Reserve (Fed) will start scaling back its stimulus, while other central banks will likely wait or provide more stimulus. The Fed is expected to be-gin scaling back its bond purchases no later than January 2014, while leaving interest rates unchanged until early 2015.


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