A fine balance — is the industry swinging like a pendulum?

The International Monetary Fund (IMF) published a World Economic Outlook update in July 2022 titled Gloomy and More Uncertain, which projected annual gross domestic product (GDP) growth rates for year-end, with France, Germany, Italy and Spain all producing better results than anticipated. Even the eurozone as a whole was projected to grow only 2.6% but managed to close the year at 3.5% growth. Suddenly, it seemed that things weren’t as bad as expected … unfortunately, economic forecasts are not perfect. Things change daily and can impact the construction industry directly, indirectly, proportionately and — sometimes — disproportionately.

The latest IMF report published in January had a more positive title, Inflation Peaking Amid Low Growth. France, Germany and Spain had drops in inflation in December 2022, leading people to believe the worst had passed. However, all three countries experienced small rises in February. Despite these better-than-expected results, the updated forecast for GDP growth in 2023 is now lower than it was when calculated in the July report.

The European Union (EU) and European Central Bank are working to find a balance in gas price caps and interest rates, both possibly the most influential macro-economic factors in construction pricing in the last six months. All five Gleeds western mainland European countries have reported how energy prices and local government regulations are affecting tender prices. But gas is not the only thing fuelling the construction industry — what about market demand, material availability, contract clauses and more?

The European Business Construction Survey, updated monthly, provides contractor insight. France, Germany and Spain had higher confidence ratings when compared to January 2023. Likewise, all five countries improved their employment expectations outlook last month, likely due to reduced market uncertainty and fear. As reported in the last Gleeds central European report, published in February, the mild winter experienced in several EU countries has allowed for gas storage levels to remain high and eased overwhelming concerns that the economy would go into recession.

If it appears that the industry is swinging like a pendulum, you may be right. Perhaps last year was the ‘lessons learnt’ period that the industry needed, to prepare for 2023. The slightest whisper of change is swaying stakeholders back and forth while the industry searches for equilibrium.

Thankfully, this time everyone is better positioned for whatever may come next.