European economies for the most part appear to be improving as we move into 2018, Portugal. Spain, Ireland and Italy are starting to see positive signs of growth for the first time in more than eight years. The Euro Zone is projected to see 1.9% to 2.2% GDP growth in the 1st half of 2018, the European construction sector is expected to see slow to moderate growth for the next two years.
The economic impact and uncertainty of “Brexit” is still being experienced in the UK, the Pound Sterling has dropped more than 10% against the USA Dollar in the last eighteen months. The British economy and its construction sector has weathered the “Brexit” storm and is improving from its short post-Brexit dive. The British housing market is now starting to trend upwards again as we move into the 1st Q of 2018. The jury is still out on “Brexit” – some experts believe it will positively impact the UK construction industry, while there is another group that forecasts the opposite. The High Speed Rail Link (HS2) between London and Birmingham (150 km costing $5 billion) is officially a “go,” this four year project is projected to employ as many as 10,000 construction related jobs. Construction costs in the Britain are moving upwards again in the 2.5% to 3.5% range. British Trade Unions are looking for increases in hourly wage rates of between 4% and 6%. If this happens, look for inflation and construction costs to start increasing in the 1st half of 2018 and beyond. The UK GDP is forecast to grow to 1.5% range in the 1st half of 2018, the unemployment rate is improving, the current rate is 4.3%, and construction unemployment is higher at 5.1% to 6.3%.
The German GDP growth is forecast to be 2.2% in the 1st half of 2018, unemployment is currently 3.6%. Germany is the largest economy in the Euro Zone, slow and steady growth appears to be in the cards for the 1st half of 2018, and German construction activity in the 1st half of 2018 is expected to moderately improve over 2017 levels.
Economic growth and construction activity in the Netherlands, France, Belgium, Hungary, Denmark, Czech Republic and Sweden is projected to start moving in a nominal / positive direction for the 1st half of 2018. The Euro is forecast to trade in the 1.15 to 1.25 to the USA Dollar in the 1st half of 2018. The Eastern European construction sector that includes Hungary, Latvia, Estonia, Poland and Romania is starting to see nominal growth of 1.5% to 1.7% as we move into 2018.
The French economy is forecast to grow by 1.9% for the 1st half of 2018. Lower energy costs are projected to uphold France on a moderate path forward to a slow economic recovery. The construction sector continues to experience minimal growth; there are a number of major infrastructure / transportation projects in the pipeline, unemployment in France is forecast to be in the 9% to 9.5% range in the 1st half of 2018, with construction unemployment in the 12% to 14% range.
The other European economies such as Austria, Greece, Finland, Lithuania and Switzerland remain lethargic, with restrained / limited growth and high unemployment rates. The uncertainty in the Euro Zone (28 countries) continue to squeeze construction spending in the majority of the Western and Eastern European construction sectors.