Coface Group


Latin America
Northern America
Central & Eastern Europe
Western Europe
Mid-East & Turkey
Change sector


  • World population growth
  • Continued increase in urbanisation
  • Major infrastructure projects expected


  • Increased credit risk for companies in the sector in China with high debt levels and overcapacity
  • Household debt levels remain high in the United States, Western Europe and several large emerging economies
  • Upward trend in global interest rates
  • Increase in input production costs

Risk Analysis



The economic outlook for the construction sector in 2019 is dimming to varying degrees around the world against a backdrop of slowing global economic growth. In the European Union, where economic activity is poised to cool, growth is expected to reach 1.7% in 2019 against 2% in 2018. Credit risk will remain particularly high in the sector in China, where the gradual deceleration in growth is being combined with a more restrictive monetary policy (to tackle the housing bubble) and continuation of the strategy to rein in production overcapacity. Chinese companies in the sector remain highly indebted. Construction is expected to be one of the riskiest sectors in 2019 according to the analyses for the 13 sectors for which Coface publishes assessments (see page 11).

The global setting, featuring a trade war and higher production costs due in particular to forecast price increases for certain metals and lumber, will present additional difficulties for companies in the sector.

In the United States, the outlook for the sector is deteriorating, as the country faces more downbeat economic growth prospects in 2019. Coface expects growth to reach 2.3% in 2019 compared with 2.9% in 2018. This is in a context where the effect of the tax stimulus initiated by the government at the end of 2017 is fading and is being largely offset by the Federal Reserve’s rate hikes.

In Latin America, credit risk for companies in the sector is expected to remain high, following numerous corruption scandals in the award of public contracts in this area, and the currency crisis in Argentina, which has led to fiscal austerity measures and very significant increases in interest rates. In Turkey, as in Argentina, last year's severe currency crisis and the economic recession that is now taking hold are likely to sustain the contraction in demand in the sector.

Further out, the prospects are expected to improve and will continue to be supported by global population growth and thus sustained structural housing demand, as part of an international trend towards increased urbanisation. A 2018 study by HNY Research, a consultancy, indicates that global demand for construction equipment is set to surge over the next five years, thanks to a market segment that is expected to grow by about 8% per year through to 2023.


Global demand in the construction sector will be affected in 2019 by the interest rate increases expected in many advanced economies – a process that has already begun in the United States and the United Kingdom. In the eurozone, the European Central Bank expects to hike interest rates by the summer of 2019, while central banks in Central and Eastern Europe have already begun to exit their accommodative monetary policies, with Romania and Czechia starting to take these steps in late 2017. Some Asian countries, including Korea, Indonesia and the Philippines, are taking similar action. More generally, demand in the sector will be depressed by the slowdown in the global economy, which we expect to expand by 3% in 2019 compared with 3.2% in 2018.

In the EU, Coface expects economic activity to falter, with growth expected to reach 1.7% in 2019 compared with 2% in 2018. The British construction sector was hit hard by uncertainties related to Brexit in 2018, through a loss of consumer confidence and higher interest rates. New orders, both in terms of infrastructure and private commercial activities, fell by 6.6% in the third quarter of 2018 compared with the first quarter in the United Kingdom. In the United States, the outlook for the sector is deteriorating as the country faces a less positive economic growth forecast for 2019. Coface expects growth to reach 2.3% in 2019 compared with 2.9% in 2018, making for a situation that will likely contribute further constrain demand, at a time when the effects of the corporate tax cuts introduced at the end of 2017 have been offset by successive rate hikes by the Federal Reserve. In China, the gradual deceleration in expected economic growth (6.2% in 2019 compared with 6.5% in 2018) combined with the effects of the government's measures to tackle the housing bubble, should constrain demand.

Nevertheless, in the longer term, the global trend towards urbanisation coupled with the structural increase in the world population should limit to support demand in the sector.


The construction sector around the world displays contrasting realities and varying prospects for 2019. The continued increase in production costs will have a negative impact on the sector's performance. The increase continues to be mainly due to higher prices for some metals that are widely used in the construction sector compared to historical trends, such as steel, as well as for lumber.

US indicators are deteriorating. Activity in the construction sector is contracting, with building permits and housing starts falling by 5.8% and 2.9% respectively year-on-year in October 2018. Both residential construction and spending project also showed signs of deterioration at the end of last year, and this trend is expected to continue in 2019.

One of the main risks for the US construction sector in 2019 will be related to the repercussions of the trade war started by the Trump administration. In particular, the administration has decided to introduce customs tariffs on a portion of steel (25%) and aluminium (10%) imports into the United States, which significantly increases production costs for construction companies. A development that could have a positive impact on construction in the United States would be the implementation of the major infrastructure projects proposed by President Trump during the presidential campaign. However, the scope and possible budgets of these projects remain uncertain at this stage. In Europe, the sector will be affected by the economic slowdown.


Last update : February 2019

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