Overall, the findings of the construction monitors are more positive than the recent RICS Commercial Property Monitor. But those findings may soften expectations within the construction industry that the global economy is undergoing a robust post-pandemic bounce back.
“Workloads continue to rise, to a greater or lesser degree, across all sectors at the global level, even if some national markets have seen growth stall over Q2,” says Tarrant Parsons, senior economist at RICS.
The Global Construction Activity Index (CAI) measures current and expected market activity in the construction industry. The rapid growth seen in the CAI around the world in the first half of 2021 has eased off and while all regions have maintained growth, Asia Pacific and Europe are closest to heading into a decline.
“At the global level, the CAI eased over the latest survey period, posting a figure of +12 compared to +20 last time, says Parsons. “Although still in positive territory and therefore consistent with an overall expansion in activity, this does represent the softest reading since Q4 2020.
The Americas posted the strongest growth for Q2 2022 of the global regions, at just over 27%, while APAC’s growth was slowest at 4.5%.
The hiring outlook for the next 12 months is largely positive, with most countries surveyed in the monitor reporting an expected increase to company headcounts. One notable exception is China, where a net balance of -6% offers a more downcast expectation. Although this is tempered by the fact that in the previous three months the net balance was -54%, so this actually represents a significant improvement.
“At the global level, a net balance of +24% of survey participants envisage headcounts increasing across the industry in the coming year,” says Parsons. “The employment outlook is strongest in Saudi Arabia and India, with both nations posting a further improvement in 12-month sentiment during Q2. At the other end of the spectrum, respondents across Sri Lanka see headcounts being reduced over the year to come, while the outlook is modestly negative within China, Malaysia and Qatar.”
Inflation is among the biggest concerns for RICS members worldwide and a major issue currently facing the industry. To create the word cloud below, we collated all the member comments from the latest Global Construction Monitor.
Some of the member comments from around the world that highlighted challenges included:
“Booming mining industry having a dramatic impact on the availability of skilled resources” – RICS member in Australia
"Inflation resulted from quantitative easing on currency” – New Zealand
“War in Ukraine and associated sanctions on Russia is continuing to impact the price of materials” - Ireland
“Severe skills shortages and supply chain issues, with suppliers being scarce and inflation rampant” - Spain
“Aggressive project timescales reduce the time available for sustainability optioneering” - UK
"Very high material costs and extremely slow client payments" - Qatar
As well as ‘inflation’ and ‘cost’, ‘covid’ was among the most repeated words in member comments, suggesting the aftereffects of the pandemic are still being felt throughout the industry. That could mean disrupted supply chains, shortage of staff, material production costs or all of the above.
According to the Construction Industry Training Board (CITB), a quarter of a million new workers are needed in UK construction by 2026 to meet rising demand. The sectors most likely to be affected by the shortages are infrastructure, private housing and repair and maintenance.
Simon Rubinsohn, chief economist at RICS, gives this assessment: “The difficulty of accessing both building materials and labour (as well as the rising costs attached) remain key challenges for the industry. Significantly, 60% of respondents identified problems with recruiting quantity surveyors which is the highest share since Q4 2018.”
Among the comments from members based in the UK that highlighted skills shortages were: “Lack of skilled labour is creating substantial delays and costs.”
Read the full Global Construction Monitor and UK Construction and Infrastructure Monitor for Q2 2022.