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Global Construction Activity – February 2012

The Global Construction Industry commenced this New Year with hope, considering the positive developments in the Euro Zone debt crisis and strengthening sentiment in the US economy. Building outlays, in the US, increased by around 1.5% in December 2011, which was the highest gain since August 2011. Private construction spending grew at 2% in December 2011 on a M-o-M basis, whereas, public construction spending increased by 0.5% in December 2011, when compared to that of November 2011. Although housing starts for the month of December 2011 fell by 4.1 %, industry experts opine that the fall was mainly due to the holiday season and recovery of the construction industry is still intact, proven by the fact that housing starts for 2011 grew by 3.4% compared to 2010.
In China, The Central Bank announced their decision to support first time home buyers, by sanctioning housing loans on priority, to them over the others’. This move has been seen as an effort to prevent the hard landing of the real estate sector. Other indications of government support came from the eastern city of Wuhu, where the local government announced subsidies of around 50 Yuan, per square meter, for purchase of homes between 70 square meters and 90 square meters and 150 Yuan, per square meter, for new homes smaller than 70 square meters. Many other provinces are expected to follow suit and introduce such subsidies to boost home sales.
Further, the Chinese New Year in the month of January 2012, led to a drop in construction activities in China. This is reflected in the non-manufacturing business activity index, which reports a fall of 52.9, in January 2012, from 56 in December 2011.
In the UK, the Markit purchasing managers index for the construction sector fell to 51.4 in January 2012, from 53.3 in December 2011. Any reading above 50 indicates that the construction industry is expanding. The sub-index for business expectations surged from 57.6 to 66.2, indicating optimism regarding the improving economic situation which would lead to robust construction growth in the coming months.
Construction activity in Australia continued its downward trend as the AIG Australian Performance of Construction Index fell by 1.2 points to 39.8, in January 2012 compared to December 2011. Further, major banks, like the WESTPAC Banking Corporation & ANZ Bank, have raised its interest rates by 10 and 6 basis points, respectively, after the country’s Central Bank failed to cut rates and kept them on hold, recently. Such an increase in interest rates by banks signals that the construction sector in Australia will take more time to recover in the short term.
Recently, an accord has been reached between the leaders of Greece and other Euro zone nations to tackle Greece’s debt problems, wherein, a new austerity plan which makes sharp cuts to minimum wages and thousands of government jobs have been approved by leaders of major political parties, in exchange for a new 130 billion Euro bailout package, which is needed to prevent Greece’s default. This deal has renewed optimism among investors and businesses in the Euro zone, which could lead to higher spending in construction in the coming months in major European countries.

By Pradeep.J
Pradeep J, a research analyst in the metals team at Beroe Inc., is responsible for tracking the base metals and providing market intelligence on the economically significant base metals market. Pradeep supports the clients with strategic decisions in terms of procurement and industry’s best practices with an in-depth understanding about the base metals market.
Beroe Inc. is positioned at the forefront of providing procurement intelligence and customized market research reports. Beroe believe in category expertise and thereby provide up-to-date information which enables the clients to take appropriate procurement decisions. The primary focus industries are Healthcare, Food, Beverage, Tobacco, Personal Products, Chemicals, Materials, Mining, Oil, Gas, Banking, and Technology.

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