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The North America Heavy Construction Sectors : A Company and Industry Analysis (February 2005)
Mergent, Feb 2005, Pages: 32
This report looks at the heavy construction in North America, with a focus on the US and Canada
Current Environment - Key Points
- Spending on construction in the US grew by 9% ($832.4 billion) in the January to October 2004 period compared to January to October 2003, but the growth was flat from July to October 2004
- In Canada, the growth of residential construction was strong during the last six months of 2004 but non-residential construction slowed following a fall in demand
- In the US, the transport/transportation, energy, property/development and health/tourism/hospitality sectors were the major contributors to construction
In Canada, the natural resources/energy and property/development sectors were the largest contributors
- US companies reported good profits in the third quarter of 2004 but future unfavorable shifts in material prices and/or the devaluation of the US dollar could add to costs and cut into profits
- Canadian companies had to cope with a stronger domestic currency, greater competition in the domestic infrastructure construction space and a tightening of demand for non-residential construction
- In the US, controversy involving the awarding of contracts without tendering put the spotlight on the influence of private lobbying on politics
Industry Profile - Key Points
- The US Government continues to drive construction spending, while the Canadian Government is spending on construction with its budget surplus
- In the US, clustering and consolidation of sectors in specific areas - e.g
IT/high-tech and entertainment - increased construction and density, in addition to government efforts to prop up construction
- While the US and Canadian Governments have spent, both countries- sectors face challenges, including relocating overseas due to a saturated domestic market and the need to cut costs to remain competitive
- Policies specifically formulated for construction have had varying degrees of success
In addition, the changing global economy could make such policies void or ineffective in meeting newer challenges
Market Trends and Outlook - Key Points
- In the US and Canada, once leading sectors have been weakened by issues including outsourcing and inefficiencies
However, changing demographics and socioeconomics have increased demand in the retail and healthcare sectors, which may have a positive impact
- In the US, labor-intensive businesses are relocating overseas while services/administration functions remain localized
- In Canada, advances in construction technology have aided construction and post-construction monitoring and maintenance, opening opportunities to segments such as software programmers, construction consultancies and managerial firms
- Both the US and Canada have to adjust to unfavorable foreign exchange regimes, changing consumer preferences, and the loss of dominance by domestic industry leaders
- In 2005, continuing government projects should keep both countries- construction sectors growing but as supporting sectors reassess their positions, a possible slowdown could further impact construction plans in the short term
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