- Construction activity contraction far less severe in Q3, with RICS’ activity indicator standing at -9, compared to -24 in Q2, led by more robust figures from China
- Infrastructure has driven this improvement with growth in IT sub-sector in particular
- As focus shifts to building back better, measurement of carbon emissions on projects falls short
The steep fall in construction activity seen earlier in 2020 eased significantly in the last quarter, despite ongoing economic uncertainty, according our latest Global Construction Monitor.
Our Global Construction Activity Index1, a measure of current and expected construction market conditions among construction professionals read -9 in Q3. While this represents an ongoing deterioration in activity, this was far less severe than in Q2, when the reading stood at -24, reflecting the impact of governments’ fiscal stimulus measures, and the reduced drag of lockdown measures.
While conditions are still negative in regions, they are less so in Asia Pacific (-6), driven by a brightening outlook in China. The Middle East and Africa and Europe both report a much more modest deterioration than in the previous quarter, improving from -40 to -11 and from -27 to -11 respectively.
Infrastructure investment key to recovery as IT sector takes off
Work on infrastructure projects has underpinned the improved, albeit subdued, outlook, and is expected to lead the global recovery over the next year. The infrastructure sector proved more resilient than other sectors during the second quarter, and has remained so across most regions in Q3. Respondents report that it is the only sector that is growing at a global level, largely driven by a pick-up in activity in China, where a net balance of +53% of respondents noted an increase in infrastructure workloads.
The information and communication technology sub-sector has been a clear beneficiary of the dramatic socio-economic changes COVID-19 is driving. Globally, it was responsible for the growth in the overall infrastructure sector, with 24 out of 26 markets surveyed reporting increasing workloads.
Looking ahead, the outlook for infrastructure is especially positive in Asia Pacific and the Middle East and Africa. Outside of China, the outlook for infrastructure workloads is particularly robust in Australia, New Zealand, the Philippines, Sri Lanka, Saudi Arabia, Nigeria and Qatar. Although in Europe private residential workloads are expected to be the first to recover, respondents in Italy have an upbeat outlook for infrastructure. In the Americas, the outlook for infrastructure in Canada is particularly strong.
Simon Rubinsohn, chief economist, RICS, commented: “Sentiment, while still depressed, started to improve in the last quarter, with infrastructure central to this. However, a second wave of the pandemic in many countries brings a new layer of uncertainty to construction globally, just as signs were emerging of the market beginning to find its feet.
“Amid the heightened economic uncertainty caused by rising infection rates and stricter lockdown measures in several parts of the world, governments’ fiscal interventions will dictate the speed and scale of recovery in construction; professionals in the sector are clear that infrastructure spending will be a key driver in any bounce back next year.”